Correlation Between JD and ASOS Plc
Can any of the company-specific risk be diversified away by investing in both JD and ASOS Plc at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining JD and ASOS Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Inc Adr and ASOS plc PK, you can compare the effects of market volatilities on JD and ASOS Plc and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in JD with a short position of ASOS Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and ASOS Plc.
Diversification Opportunities for JD and ASOS Plc
Good diversification
The 3 months correlation between JD and ASOS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and ASOS plc PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS plc PK and JD is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on JD Inc Adr are associated (or correlated) with ASOS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS plc PK has no effect on the direction of JD i.e., JD and ASOS Plc go up and down completely randomly.
Pair Corralation between JD and ASOS Plc
Allowing for the 90-day total investment horizon JD Inc Adr is expected to under-perform the ASOS Plc. In addition to that, JD is 1.09 times more volatile than ASOS plc PK. It trades about -0.07 of its total potential returns per unit of risk. ASOS plc PK is currently generating about -0.02 per unit of volatility. If you would invest 488.00 in ASOS plc PK on September 3, 2024 and sell it today you would lose (13.00) from holding ASOS plc PK or give up 2.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. ASOS plc PK
Performance |
| Timeline |
| JD Inc Adr |
| ASOS plc PK |
JD and ASOS Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and ASOS Plc
The main advantage of trading using opposite JD and ASOS Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, ASOS Plc can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ASOS Plc will offset losses from the drop in ASOS Plc's long position.The idea behind JD Inc Adr and ASOS plc PK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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