Correlation Between JD and Wayfair
Can any of the company-specific risk be diversified away by investing in both JD and Wayfair 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 Wayfair 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 Wayfair, you can compare the effects of market volatilities on JD and Wayfair 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 Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Wayfair.
Diversification Opportunities for JD and Wayfair
Weak diversification
The 3 months correlation between JD and Wayfair is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair 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 Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of JD i.e., JD and Wayfair go up and down completely randomly.
Pair Corralation between JD and Wayfair
Allowing for the 90-day total investment horizon JD Inc Adr is expected to under-perform the Wayfair. But the stock apears to be less risky and, when comparing its historical volatility, JD Inc Adr is 1.24 times less risky than Wayfair. The stock trades about -0.24 of its potential returns per unit of risk. The Wayfair is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,443 in Wayfair on August 28, 2024 and sell it today you would earn a total of 384.00 from holding Wayfair or generate 8.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. Wayfair
Performance |
| Timeline |
| JD Inc Adr |
| Wayfair |
JD and Wayfair Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Wayfair
The main advantage of trading using opposite JD and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair's long position.The idea behind JD Inc Adr and Wayfair 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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