Correlation Between JD Sports and Capital Drilling
Can any of the company-specific risk be diversified away by investing in both JD Sports and Capital Drilling 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 Capital Drilling 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 Capital Drilling, you can compare the effects of market volatilities on JD Sports and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Capital Drilling.
Diversification Opportunities for JD Sports and Capital Drilling
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JD Sports and Capital is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of JD Sports i.e., JD Sports and Capital Drilling go up and down completely randomly.
Pair Corralation between JD Sports and Capital Drilling
Assuming the 90 days trading horizon JD Sports Fashion is expected to generate 1.01 times more return on investment than Capital Drilling. However, JD Sports is 1.01 times more volatile than Capital Drilling. It trades about -0.08 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.11 per unit of risk. If you would invest 9,514 in JD Sports Fashion on November 3, 2024 and sell it today you would lose (602.00) from holding JD Sports Fashion or give up 6.33% 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. Capital Drilling
Performance |
| Timeline |
| JD Sports Fashion |
| Capital Drilling |
JD Sports and Capital Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Capital Drilling
The main advantage of trading using opposite JD Sports and Capital Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Capital Drilling 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 Capital Drilling will offset losses from the drop in Capital Drilling's long position.| JD Sports vs. FC Investment Trust | JD Sports vs. Bankers Investment Trust | JD Sports vs. Batm Advanced Communications | JD Sports vs. The Mercantile Investment |
| Capital Drilling vs. Samsung Electronics Co | Capital Drilling vs. Wheaton Precious Metals | Capital Drilling vs. STMicroelectronics NV | Capital Drilling vs. Bloomsbury Publishing Plc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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