Correlation Between JD Sports and Prosiebensat
Can any of the company-specific risk be diversified away by investing in both JD Sports and Prosiebensat 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 Prosiebensat 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 Prosiebensat 1 Media, you can compare the effects of market volatilities on JD Sports and Prosiebensat 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 Prosiebensat. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Prosiebensat.
Diversification Opportunities for JD Sports and Prosiebensat
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JD Sports and Prosiebensat is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Prosiebensat 1 Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosiebensat 1 Media 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 Prosiebensat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosiebensat 1 Media has no effect on the direction of JD Sports i.e., JD Sports and Prosiebensat go up and down completely randomly.
Pair Corralation between JD Sports and Prosiebensat
Assuming the 90 days trading horizon JD Sports Fashion is expected to generate 1.65 times more return on investment than Prosiebensat. However, JD Sports is 1.65 times more volatile than Prosiebensat 1 Media. It trades about -0.23 of its potential returns per unit of risk. Prosiebensat 1 Media is currently generating about -0.37 per unit of risk. If you would invest 12,776 in JD Sports Fashion on August 30, 2024 and sell it today you would lose (2,611) from holding JD Sports Fashion or give up 20.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
JD Sports Fashion vs. Prosiebensat 1 Media
Performance |
| Timeline |
| JD Sports Fashion |
| Prosiebensat 1 Media |
JD Sports and Prosiebensat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Prosiebensat
The main advantage of trading using opposite JD Sports and Prosiebensat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Prosiebensat 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 Prosiebensat will offset losses from the drop in Prosiebensat's long position.| JD Sports vs. Indutrade AB | JD Sports vs. Microchip Technology | JD Sports vs. Pfeiffer Vacuum Technology | JD Sports vs. Allianz Technology Trust |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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