Correlation Between Jd Inc and Alibaba Group

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

Diversification Opportunities for Jd Inc and Alibaba Group

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Jd Inc and Alibaba is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Jd Inc ADR and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and Jd Inc 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 ADR are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Jd Inc i.e., Jd Inc and Alibaba Group go up and down completely randomly.

Pair Corralation between Jd Inc and Alibaba Group

Allowing for the 90-day total investment horizon Jd Inc ADR is expected to generate 1.05 times more return on investment than Alibaba Group. However, Jd Inc is 1.05 times more volatile than Alibaba Group Holding. It trades about 0.02 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.03 per unit of risk. If you would invest  6,077  in Jd Inc ADR on April 3, 2022 and sell it today you would earn a total of  518.00  from holding Jd Inc ADR or generate 8.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Jd Inc ADR  vs.  Alibaba Group Holding

 Performance (%) 
      Timeline 
Jd Inc ADR 
Jd Inc Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Jd Inc ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish fundamental indicators, Jd Inc may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Payout Ratio
0.22
Dividend Date
2022-06-14
Ex Dividend Date
2022-05-19

Jd Inc Price Channel

Alibaba Group Holding 
Alibaba Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Alibaba Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alibaba Price Channel

Jd Inc and Alibaba Group Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Jd Inc and Alibaba Group

The main advantage of trading using opposite Jd Inc and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jd Inc position performs unexpectedly, Alibaba 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.
The idea behind Jd Inc ADR and Alibaba Group Holding 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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