Correlation Between JD and Erste Group

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

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

Diversification Opportunities for JD and Erste Group

0.21

Correlation Coefficient

JD  Erste Group

Modest diversification

The 3 months correlation between JD and Erste is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of JD i.e., JD and Erste Group go up and down completely randomly.

Pair Corralation between JD and Erste Group

Assuming the 90 days horizon JD Inc is expected to generate 3.09 times more return on investment than Erste Group. However, JD is 3.09 times more volatile than Erste Group Bank. It trades about 0.18 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.26 per unit of risk. If you would invest  2,365  in JD Inc on September 16, 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

JD Inc  vs.  Erste Group Bank

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.

Erste Group Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Erste Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD and Erste Group

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

The idea behind JD Inc and Erste Group Bank 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.