Correlation Between JD Sports and Overstock
Can any of the company-specific risk be diversified away by investing in both JD Sports and Overstock 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 Overstock 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 Overstock, you can compare the effects of market volatilities on JD Sports and Overstock 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 Overstock. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Overstock.
Diversification Opportunities for JD Sports and Overstock
Very poor diversification
The 3 months correlation between JD Sports and Overstock is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock 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 Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of JD Sports i.e., JD Sports and Overstock go up and down completely randomly.
Pair Corralation between JD Sports and Overstock
Assuming the 90 days trading horizon JD Sports Fashion is expected to generate 0.66 times more return on investment than Overstock. However, JD Sports Fashion is 1.51 times less risky than Overstock. It trades about -0.05 of its potential returns per unit of risk. Overstock is currently generating about -0.1 per unit of risk. If you would invest 17,121 in JD Sports Fashion on September 14, 2024 and sell it today you would lose (6,921) from holding JD Sports Fashion or give up 40.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.81% |
| Values | Daily Returns |
JD Sports Fashion vs. Overstock
Performance |
| Timeline |
| JD Sports Fashion |
| Overstock |
JD Sports and Overstock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Overstock
The main advantage of trading using opposite JD Sports and Overstock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Overstock 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 Overstock will offset losses from the drop in Overstock's long position.| JD Sports vs. Hochschild Mining plc | JD Sports vs. Supermarket Income REIT | JD Sports vs. Associated British Foods | JD Sports vs. Fulcrum Metals PLC |
| Overstock vs. Adriatic Metals | Overstock vs. Foresight Environmental Infrastructure | Overstock vs. Golden Metal Resources | Overstock vs. Silvercorp Metals |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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