Correlation Between Este Lauder and JD

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

By analyzing existing cross correlation between The Este Lauder and JD Inc, you can compare the effects of market volatilities on Este Lauder and JD 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 Este Lauder with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Este Lauder and JD.

Diversification Opportunities for Este Lauder and JD

0.22

Correlation Coefficient

Este Lauder  JD

Modest diversification

The 3 months correlation between Este and JD is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc and Este Lauder 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 The Este Lauder are associated (or correlated) with JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Este Lauder i.e., Este Lauder and JD go up and down completely randomly.

Pair Corralation between Este Lauder and JD

Assuming the 90 days trading horizon Este Lauder is expected to generate 10.14 times less return on investment than JD. But when comparing it to its historical volatility, The Este Lauder is 1.08 times less risky than JD. It trades about 0.02 of its potential returns per unit of risk. JD Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,365  in JD Inc on September 15, 2024 and sell it today you would earn a total of  1,175  from holding JD Inc or generate 49.68% return on investment over 90 days.

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

The Este Lauder  vs.  JD Inc

Este Lauder

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Este Lauder are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Este Lauder is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

JD Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, JD demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Este Lauder and JD

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

The idea behind The Este Lauder and JD 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.