Correlation Between JD and Carvana

Can any of the company-specific risk be diversified away by investing in both JD and Carvana 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 Carvana 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 Carvana Co, you can compare the effects of market volatilities on JD and Carvana 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 Carvana. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Carvana.

Diversification Opportunities for JD and Carvana

0.73

Correlation Coefficient

JD  Carvana

Poor diversification

The 3 months correlation between JD and Carvana is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Adr are associated (or correlated) with Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of JD i.e., JD and Carvana go up and down completely randomly.

Pair Corralation between JD and Carvana

Allowing for the 90-day total investment horizon JD is expected to generate 1.84 times less return on investment than Carvana. But when comparing it to its historical volatility, JD Inc Adr is 2.27 times less risky than Carvana. It trades about 0.29 of its potential returns per unit of risk. Carvana Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  8,240  in Carvana Co on February 3, 2024 and sell it today you would earn a total of  3,410  from holding Carvana Co or generate 41.38% return on investment over 90 days.

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

JD Inc Adr  vs.  Carvana Co

JD Inc Adr

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Carvana

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD and Carvana

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

The idea behind JD Inc Adr and Carvana Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.