Correlation Between JD and CECE Composite

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

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

Diversification Opportunities for JD and CECE Composite

-0.55

Correlation Coefficient

JD  CECE Composite

Excellent diversification

The 3 months correlation between JD and CECE is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and CECE Composite EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECE Composite EUR 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 CECE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECE Composite EUR has no effect on the direction of JD i.e., JD and CECE Composite go up and down completely randomly.

Pair Corralation between JD and CECE Composite

Assuming the 90 days horizon JD Inc is expected to under-perform the CECE Composite. In addition to that, JD is 1.94 times more volatile than CECE Composite EUR. It trades about -0.08 of its total potential returns per unit of risk. CECE Composite EUR is currently generating about 0.16 per unit of volatility. If you would invest  250,893  in CECE Composite EUR on May 19, 2025 and sell it today you would earn a total of  23,430  from holding CECE Composite EUR or generate 9.34% return on investment over 90 days.

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

JD Inc  vs.  CECE Composite EUR

Pair Trading with JD and CECE Composite

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

The idea behind JD Inc and CECE Composite EUR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.