Correlation Between Etsy and JD

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

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

Diversification Opportunities for Etsy and JD

-0.54

Correlation Coefficient

Etsy  JD

Excellent diversification

The 3 months correlation between Etsy and JD is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr and Etsy 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 Etsy Inc 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 Adr has no effect on the direction of Etsy i.e., Etsy and JD go up and down completely randomly.

Pair Corralation between Etsy and JD

Given the investment horizon of 90 days Etsy is expected to generate 74.13 times less return on investment than JD. But when comparing it to its historical volatility, Etsy Inc is 1.66 times less risky than JD. It trades about 0.0 of its potential returns per unit of risk. JD Inc Adr is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,700  in JD Inc Adr on August 30, 2024 and sell it today you would earn a total of  1,019  from holding JD Inc Adr or generate 37.74% return on investment over 90 days.

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

Etsy Inc  vs.  JD Inc Adr

Etsy Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Etsy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

JD Inc Adr

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etsy and JD

The main advantage of trading using opposite Etsy and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy 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 Etsy Inc and JD Inc Adr 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.