Correlation Between JD Sports and Broadstone Net

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

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

Diversification Opportunities for JD Sports and Broadstone Net

-0.44

Correlation Coefficient

JD Sports  Broadstone Net

Very good diversification

The 3 months correlation between JDDSF and Broadstone is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Broadstone Net LeaseInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadstone Net LeaseInc and JD Sports 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 Sports Fashion are associated (or correlated) with Broadstone Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadstone Net LeaseInc has no effect on the direction of JD Sports i.e., JD Sports and Broadstone Net go up and down completely randomly.

Pair Corralation between JD Sports and Broadstone Net

Assuming the 90 days horizon JD Sports Fashion is expected to generate 0.8 times more return on investment than Broadstone Net. However, JD Sports Fashion is 1.25 times less risky than Broadstone Net. It trades about 0.21 of its potential returns per unit of risk. Broadstone Net LeaseInc is currently generating about -0.06 per unit of risk. If you would invest  148.00  in JD Sports Fashion on January 20, 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

JD Sports Fashion  vs.  Broadstone Net LeaseInc

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.

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 unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with JD Sports and Broadstone Net

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

The idea behind JD Sports Fashion and Broadstone Net LeaseInc 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 the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.