Correlation Between European Wax and JD Sports
Can any of the company-specific risk be diversified away by investing in both European Wax 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 European Wax and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Wax Center and JD Sports Fashion, you can compare the effects of market volatilities on European Wax 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 European Wax with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Wax and JD Sports.
Diversification Opportunities for European Wax and JD Sports
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between European and JDSPY is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center 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 European Wax 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 European Wax Center 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 European Wax i.e., European Wax and JD Sports go up and down completely randomly.
Pair Corralation between European Wax and JD Sports
Given the investment horizon of 90 days European Wax Center is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, European Wax Center is 1.08 times less risky than JD Sports. The stock trades about -0.06 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 203.00 in JD Sports Fashion on August 31, 2024 and sell it today you would lose (80.00) from holding JD Sports Fashion or give up 39.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
European Wax Center vs. JD Sports Fashion
Performance |
| Timeline |
| European Wax Center |
| JD Sports Fashion |
European Wax and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Wax and JD Sports
The main advantage of trading using opposite European Wax and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Wax 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.| European Wax vs. Edgewell Personal Care | European Wax vs. Inter Parfums | European Wax vs. Henkel AG Co | European Wax vs. Mannatech Incorporated |
| JD Sports vs. Burlington Stores | JD Sports vs. Childrens Place | JD Sports vs. Buckle Inc | JD Sports vs. Shoe Carnival |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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