Correlation Between JD Sports and Calliditas Therapeutics

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

Diversification Opportunities for JD Sports and Calliditas Therapeutics

-0.28

Correlation Coefficient

JD Sports  Calliditas Therapeutics

Very good diversification

The 3 months correlation between JDDSF and Calliditas is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Calliditas Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calliditas Therapeutics 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 Calliditas Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calliditas Therapeutics has no effect on the direction of JD Sports i.e., JD Sports and Calliditas Therapeutics go up and down completely randomly.

Pair Corralation between JD Sports and Calliditas Therapeutics

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Calliditas Therapeutics. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.64 times less risky than Calliditas Therapeutics. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Calliditas Therapeutics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,100  in Calliditas Therapeutics on February 1, 2024 and sell it today you would lose (106.00) from holding Calliditas Therapeutics or give up 5.05% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  Calliditas Therapeutics

JD Sports Fashion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Calliditas Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calliditas Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Calliditas Therapeutics is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JD Sports and Calliditas Therapeutics

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

The idea behind JD Sports Fashion and Calliditas Therapeutics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.