Correlation Between Amazon and JD Sports
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and JD Sports Fashion, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and JD Sports.
Diversification Opportunities for Amazon and JD Sports
Excellent diversification
The 3 months correlation between Amazon and JD Sports is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and JD Sports go up and down completely randomly.
Pair Corralation between Amazon and JD Sports
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.95 times more return on investment than JD Sports. However, Amazon Inc is 1.05 times less risky than JD Sports. It trades about 0.06 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.03 per unit of risk. If you would invest 17,075 in Amazon Inc on October 29, 2024 and sell it today you would earn a total of 6,825 from holding Amazon Inc or generate 39.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. JD Sports Fashion
Performance |
| Timeline |
| Amazon Inc |
| JD Sports Fashion |
Amazon and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and JD Sports
The main advantage of trading using opposite Amazon and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.| Amazon vs. Gamma Communications PLC | Amazon vs. Southwest Airlines Co | Amazon vs. Verizon Communications | Amazon vs. International Consolidated Airlines |
| JD Sports vs. Sealed Air Corp | JD Sports vs. Applied Materials | JD Sports vs. Delta Air Lines | JD Sports vs. Air Products Chemicals |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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