Correlation Between JD Sports and United States

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Can any of the company-specific risk be diversified away by investing in both JD Sports and United States 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 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

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between JDDSF and United is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of JD Sports i.e., JD Sports and United States go up and down completely randomly.

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.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

JD Sports Fashion  vs.  United States Steel

 Performance 
       Timeline  
JD Sports Fashion 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
United States Steel 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, United States showed solid returns over the last few months and may actually be approaching a breakup point.

JD Sports and United States Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JD Sports and United States

The 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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