Correlation Between Foot Locker and JD Sports
Can any of the company-specific risk be diversified away by investing in both Foot Locker 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 Foot Locker and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and JD Sports Fashion, you can compare the effects of market volatilities on Foot Locker 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 Foot Locker with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and JD Sports.
Diversification Opportunities for Foot Locker and JD Sports
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Foot and JDDSF is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker 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 Foot Locker 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 Foot Locker 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 Foot Locker i.e., Foot Locker and JD Sports go up and down completely randomly.
Pair Corralation between Foot Locker and JD Sports
Allowing for the 90-day total investment horizon Foot Locker is expected to generate 0.52 times more return on investment than JD Sports. However, Foot Locker is 1.93 times less risky than JD Sports. It trades about -0.11 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.21 per unit of risk. If you would invest 2,376 in Foot Locker on August 24, 2024 and sell it today you would lose (131.00) from holding Foot Locker or give up 5.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Foot Locker vs. JD Sports Fashion
Performance |
| Timeline |
| Foot Locker |
| JD Sports Fashion |
Foot Locker and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and JD Sports
The main advantage of trading using opposite Foot Locker and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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.| Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place | Foot Locker vs. American Eagle Outfitters |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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