diversifiable risk of combining JD Sports and United States 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 United States Steel, you can compare the effects of market volatilities on JD Sports and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and United States.
Diversification Opportunities for JD Sports and United States
Pair Corralation between JD Sports and United States
Assuming the 90 days horizon JD Sports Fashion is expected to generate 6.4 times more return on investment than United States. However, JD Sports is 6.4 times more volatile than United States Steel. It trades about 0.12 of its potential returns per unit of risk. United States Steel is currently generating about -0.24 per unit of risk. If you would invest 129.00 in JD Sports Fashion on November 24, 2023 and sell it today you would earn a total of 14.00 from holding JD Sports Fashion or generate 10.85% return on investment over 90 days.
|3 Months [change]
JD Sports Fashion vs. United States Steel
JD Sports and United States Volatility Contrast
Pair Trading with JD Sports and United StatesThe main advantage of trading using opposite JD Sports and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position. The idea behind JD Sports Fashion and United States Steel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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