Correlation Between Best Buy and JD

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Can any of the company-specific risk be diversified away by investing in both Best Buy 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 Best Buy and JD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and JD Inc Adr, you can compare the effects of market volatilities on Best Buy 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 Best Buy with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and JD.

Diversification Opportunities for Best Buy and JD

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Best and JD is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co 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 Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and JD go up and down completely randomly.

Pair Corralation between Best Buy and JD

Considering the 90-day investment horizon Best Buy is expected to generate 4.58 times less return on investment than JD. But when comparing it to its historical volatility, Best Buy Co is 2.56 times less risky than JD. It trades about 0.12 of its potential returns per unit of risk. JD Inc Adr is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,281  in JD Inc Adr on December 30, 2023 and sell it today you would earn a total of  458.00  from holding JD Inc Adr or generate 20.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Best Buy Co  vs.  JD Inc Adr

 Performance 
       Timeline  
Best Buy 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in April 2024.
JD Inc Adr 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, JD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Best Buy and JD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Best Buy and JD

The main advantage of trading using opposite Best Buy and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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 Best Buy Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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