Correlation Between Jumia Technologies and LightInTheBox Holding

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

By analyzing existing cross correlation between Jumia Technologies AG and LightInTheBox Holding Co, you can compare the effects of market volatilities on Jumia Technologies and LightInTheBox Holding 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 Jumia Technologies with a short position of LightInTheBox Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jumia Technologies and LightInTheBox Holding.

Diversification Opportunities for Jumia Technologies and LightInTheBox Holding

-0.51

Correlation Coefficient

Jumia Technologies  LightInTheBox Holding

Excellent diversification

The 3 months correlation between Jumia and LightInTheBox is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Jumia Technologies AG and LightInTheBox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightInTheBox Holding and Jumia Technologies 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 Jumia Technologies AG are associated (or correlated) with LightInTheBox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightInTheBox Holding has no effect on the direction of Jumia Technologies i.e., Jumia Technologies and LightInTheBox Holding go up and down completely randomly.

Pair Corralation between Jumia Technologies and LightInTheBox Holding

Given the investment horizon of 90 days Jumia Technologies AG is expected to generate 1.73 times more return on investment than LightInTheBox Holding. However, Jumia Technologies is 1.73 times more volatile than LightInTheBox Holding Co. It trades about 0.1 of its potential returns per unit of risk. LightInTheBox Holding Co is currently generating about -0.08 per unit of risk. If you would invest  321.00  in Jumia Technologies AG on February 2, 2024 and sell it today you would earn a total of  128.00  from holding Jumia Technologies AG or generate 39.88% return on investment over 90 days.

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

Jumia Technologies AG  vs.  LightInTheBox Holding Co

Jumia Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jumia Technologies AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, Jumia Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

LightInTheBox Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LightInTheBox Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jumia Technologies and LightInTheBox Holding

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

The idea behind Jumia Technologies AG and LightInTheBox Holding 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.