Correlation Between Farfetch and Jd Inc

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

Diversification Opportunities for Farfetch and Jd Inc

0.09
  Correlation Coefficient

Significant diversification

The 1 month correlation between Farfetch and Jd Inc is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Farfetch Ltd Cl 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 Farfetch 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 Farfetch Ltd Cl are associated (or correlated) with Jd Inc. 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 Farfetch i.e., Farfetch and Jd Inc go up and down completely randomly.

Pair Corralation between Farfetch and Jd Inc

Given the investment horizon of 90 days Farfetch Ltd Cl is expected to generate 2.45 times more return on investment than Jd Inc. However, Farfetch is 2.45 times more volatile than Jd Inc ADR. It trades about 0.3 of its potential returns per unit of risk. Jd Inc ADR is currently generating about -0.01 per unit of risk. If you would invest  685.00  in Farfetch Ltd Cl on May 11, 2022 and sell it today you would earn a total of  287.00  from holding Farfetch Ltd Cl or generate 41.9% return on investment over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Farfetch Ltd Cl  vs.  Jd Inc ADR

 Performance (%) 
       Timeline  
Farfetch Ltd Cl 
Farfetch Performance
23 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Farfetch Ltd Cl are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Farfetch reported solid returns over the last few months and may actually be approaching a breakup point.

Farfetch Price Channel

Jd Inc ADR 
Jd Inc Performance
0 of 100
Over the last 90 days Jd Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Jd Inc is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Jd Inc Price Channel

Farfetch and Jd Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Farfetch and Jd Inc

The main advantage of trading using opposite Farfetch and Jd Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farfetch position performs unexpectedly, Jd Inc 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 Inc will offset losses from the drop in Jd Inc's long position.
The idea behind Farfetch Ltd Cl 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.
Check out your portfolio center. 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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