Correlation Between Insteel Industries and JD Sports
Can any of the company-specific risk be diversified away by investing in both Insteel Industries 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 Insteel Industries and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and JD Sports Fashion, you can compare the effects of market volatilities on Insteel Industries 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 Insteel Industries with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and JD Sports.
Diversification Opportunities for Insteel Industries and JD Sports
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insteel and JDDSF is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries 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 Insteel Industries 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 Insteel Industries 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 Insteel Industries i.e., Insteel Industries and JD Sports go up and down completely randomly.
Pair Corralation between Insteel Industries and JD Sports
Given the investment horizon of 90 days Insteel Industries is expected to generate 3.28 times less return on investment than JD Sports. But when comparing it to its historical volatility, Insteel Industries is 2.1 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 0.03 of returns per unit of risk over similar time horizon. If you would invest 109.00 in JD Sports Fashion on September 12, 2024 and sell it today you would earn a total of 37.00 from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Insteel Industries vs. JD Sports Fashion
Performance |
| Timeline |
| Insteel Industries |
| JD Sports Fashion |
Insteel Industries and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and JD Sports
The main advantage of trading using opposite Insteel Industries and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries 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.| Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp | Insteel Industries vs. Northwest Pipe |
| 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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