Correlation Between Waste Management and JD Sports
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and JD Sports Fashion, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and JD Sports.
Diversification Opportunities for Waste Management and JD Sports
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Waste and JD Sports is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and JD Sports go up and down completely randomly.
Pair Corralation between Waste Management and JD Sports
Assuming the 90 days trading horizon Waste Management is expected to generate 0.38 times more return on investment than JD Sports. However, Waste Management is 2.6 times less risky than JD Sports. It trades about 0.02 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.24 per unit of risk. If you would invest 20,778 in Waste Management on October 26, 2024 and sell it today you would earn a total of 247.00 from holding Waste Management or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.39% |
| Values | Daily Returns |
Waste Management vs. JD Sports Fashion
Performance |
| Timeline |
| Waste Management |
| JD Sports Fashion |
Waste Management and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and JD Sports
The main advantage of trading using opposite Waste Management and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Spire Healthcare Group | Waste Management vs. Optima Health plc | Waste Management vs. Ecofin Global Utilities | Waste Management vs. Cairo Communication SpA |
| JD Sports vs. Hollywood Bowl Group | JD Sports vs. Ubisoft Entertainment | JD Sports vs. Axway Software SA | JD Sports vs. Live Nation Entertainment |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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