Correlation Between Marks and JD

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

By analyzing existing cross correlation between Marks and Spencer and JD Inc Adr, you can compare the effects of market volatilities on Marks 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 Marks with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks and JD.

Diversification Opportunities for Marks and JD

0.27

Correlation Coefficient

Marks  JD

Modest diversification

The 3 months correlation between Marks and JD is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer 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 Marks 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 Marks and Spencer 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 Marks i.e., Marks and JD go up and down completely randomly.

Pair Corralation between Marks and JD

Assuming the 90 days horizon Marks and Spencer is expected to generate 2.74 times more return on investment than JD. However, Marks is 2.74 times more volatile than JD Inc Adr. It trades about 0.19 of its potential returns per unit of risk. JD Inc Adr is currently generating about -0.17 per unit of risk. If you would invest  305.00  in Marks and Spencer on March 11, 2024 and sell it today you would earn a total of  75.00  from holding Marks and Spencer or generate 24.59% return on investment over 90 days.

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

Marks and Spencer  vs.  JD Inc Adr

Marks and Spencer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marks and Spencer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Marks reported solid returns over the last few months and may actually be approaching a breakup point.

JD Inc Adr

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marks and JD

The main advantage of trading using opposite Marks and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks 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 Marks and Spencer 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.