Correlation Between Broadstone Net and JD Sports

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

By analyzing existing cross correlation between Broadstone Net LeaseInc and JD Sports Fashion, you can compare the effects of market volatilities on Broadstone Net and JD Sports 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 Broadstone Net with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadstone Net and JD Sports.

Diversification Opportunities for Broadstone Net and JD Sports

-0.57

Correlation Coefficient

Broadstone Net  JD Sports

Excellent diversification

The 3 months correlation between Broadstone and JDDSF is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Broadstone Net LeaseInc and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion and Broadstone Net 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 Broadstone Net LeaseInc are associated (or correlated) with JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Broadstone Net i.e., Broadstone Net and JD Sports go up and down completely randomly.

Pair Corralation between Broadstone Net and JD Sports

Considering the 90-day investment horizon Broadstone Net LeaseInc is expected to under-perform the JD Sports. In addition to that, Broadstone Net is 1.24 times more volatile than JD Sports Fashion. It trades about -0.08 of its total potential returns per unit of risk. JD Sports Fashion is currently generating about 0.22 per unit of volatility. If you would invest  148.00  in JD Sports Fashion on January 26, 2024 and sell it today you would earn a total of  9.00  from holding JD Sports Fashion or generate 6.08% return on investment over 90 days.

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

Broadstone Net LeaseInc  vs.  JD Sports Fashion

Broadstone Net LeaseInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadstone Net LeaseInc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

JD Sports Fashion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Sports Fashion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, JD Sports reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadstone Net and JD Sports

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

The idea behind Broadstone Net LeaseInc and JD Sports Fashion 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .