Correlation Between OReilly Automotive and JD Sports

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Can any of the company-specific risk be diversified away by investing in both OReilly Automotive 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 OReilly Automotive and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OReilly Automotive and JD Sports Fashion, you can compare the effects of market volatilities on OReilly Automotive 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 OReilly Automotive with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of OReilly Automotive and JD Sports.

Diversification Opportunities for OReilly Automotive and JD Sports

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between OReilly and JDDSF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive i.e., OReilly Automotive and JD Sports go up and down completely randomly.

Pair Corralation between OReilly Automotive and JD Sports

Given the investment horizon of 90 days OReilly Automotive is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, OReilly Automotive is 1.09 times less risky than JD Sports. The stock trades about -0.16 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  148.00  in JD Sports Fashion on January 17, 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 Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

OReilly Automotive  vs.  JD Sports Fashion

 Performance 
       Timeline  
OReilly Automotive 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in May 2024.
JD Sports Fashion 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in JD Sports Fashion are ranked lower than 6 (%) 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.

OReilly Automotive and JD Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OReilly Automotive and JD Sports

The main advantage of trading using opposite OReilly Automotive and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OReilly Automotive 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 OReilly Automotive 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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