Correlation Between JD and EBay

Can any of the company-specific risk be diversified away by investing in both JD and EBay 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 EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JD Inc and eBay Inc, you can compare the effects of market volatilities on JD and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and EBay.

Diversification Opportunities for JD and EBay

0.14

Correlation Coefficient

JD  EBay

Average diversification

The 3 months correlation between JD and EBay is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of JD i.e., JD and EBay go up and down completely randomly.

Pair Corralation between JD and EBay

Assuming the 90 days trading horizon JD is expected to generate 1.37 times less return on investment than EBay. In addition to that, JD is 2.1 times more volatile than eBay Inc. It trades about 0.03 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.08 per unit of volatility. If you would invest  5,707  in eBay Inc on September 26, 2024 and sell it today you would earn a total of  420.00  from holding eBay Inc or generate 7.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

JD Inc  vs.  eBay Inc

JD Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, JD is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

eBay Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JD and EBay

The main advantage of trading using opposite JD and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.

The idea behind JD Inc and eBay Inc 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.

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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.