Correlation Between JD and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both JD and Lowes Companies 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 Lowes Companies 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 Lowes Companies, you can compare the effects of market volatilities on JD and Lowes Companies 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 Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Lowes Companies.
Diversification Opportunities for JD and Lowes Companies
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between JD and Lowes is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies 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 Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of JD i.e., JD and Lowes Companies go up and down completely randomly.
Pair Corralation between JD and Lowes Companies
Allowing for the 90-day total investment horizon JD is expected to generate 1.53 times less return on investment than Lowes Companies. In addition to that, JD is 2.27 times more volatile than Lowes Companies. It trades about 0.02 of its total potential returns per unit of risk. Lowes Companies is currently generating about 0.06 per unit of volatility. If you would invest 20,436 in Lowes Companies on August 31, 2024 and sell it today you would earn a total of 6,807 from holding Lowes Companies or generate 33.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. Lowes Companies
Performance |
| Timeline |
| JD Inc Adr |
| Lowes Companies |
JD and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Lowes Companies
The main advantage of trading using opposite JD and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.The idea behind JD Inc Adr and Lowes Companies 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.| Lowes Companies vs. RLJ Lodging Trust | Lowes Companies vs. Aquagold International | Lowes Companies vs. Stepstone Group | Lowes Companies vs. Morningstar Unconstrained Allocation |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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