Correlation Between JD Sports and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both JD Sports and STMicroelectronics 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 JD Sports and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Sports Fashion and STMicroelectronics NV, you can compare the effects of market volatilities on JD Sports and STMicroelectronics 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 JD Sports with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and STMicroelectronics.
Diversification Opportunities for JD Sports and STMicroelectronics
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JD Sports and STMicroelectronics is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and JD Sports 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 JD Sports Fashion are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of JD Sports i.e., JD Sports and STMicroelectronics go up and down completely randomly.
Pair Corralation between JD Sports and STMicroelectronics
Assuming the 90 days trading horizon JD Sports Fashion is expected to generate 1.26 times more return on investment than STMicroelectronics. However, JD Sports is 1.26 times more volatile than STMicroelectronics NV. It trades about -0.03 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.16 per unit of risk. If you would invest 12,456 in JD Sports Fashion on September 5, 2024 and sell it today you would lose (2,166) from holding JD Sports Fashion or give up 17.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Sports Fashion vs. STMicroelectronics NV
Performance |
| Timeline |
| JD Sports Fashion |
| STMicroelectronics |
JD Sports and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and STMicroelectronics
The main advantage of trading using opposite JD Sports and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| JD Sports vs. Hyundai Motor | JD Sports vs. Toyota Motor Corp | JD Sports vs. SoftBank Group Corp | JD Sports vs. Halyk Bank of |
| STMicroelectronics vs. State Street Corp | STMicroelectronics vs. DXC Technology Co | STMicroelectronics vs. Polar Capital Technology | STMicroelectronics vs. Reckitt Benckiser Group |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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