Correlation Between JD Sports and Derwent London
Can any of the company-specific risk be diversified away by investing in both JD Sports and Derwent London 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 Derwent London 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 Derwent London PLC, you can compare the effects of market volatilities on JD Sports and Derwent London 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 Derwent London. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Derwent London.
Diversification Opportunities for JD Sports and Derwent London
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between JD Sports and Derwent is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Derwent London PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derwent London PLC 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 Derwent London. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derwent London PLC has no effect on the direction of JD Sports i.e., JD Sports and Derwent London go up and down completely randomly.
Pair Corralation between JD Sports and Derwent London
Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Derwent London. In addition to that, JD Sports is 2.32 times more volatile than Derwent London PLC. It trades about -0.42 of its total potential returns per unit of risk. Derwent London PLC is currently generating about -0.27 per unit of volatility. If you would invest 226,000 in Derwent London PLC on August 24, 2024 and sell it today you would lose (20,000) from holding Derwent London PLC or give up 8.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Sports Fashion vs. Derwent London PLC
Performance |
| Timeline |
| JD Sports Fashion |
| Derwent London PLC |
JD Sports and Derwent London Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Derwent London
The main advantage of trading using opposite JD Sports and Derwent London positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Derwent London 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 Derwent London will offset losses from the drop in Derwent London's long position.| JD Sports vs. Toyota Motor Corp | JD Sports vs. SoftBank Group Corp | JD Sports vs. State Bank of | JD Sports vs. Freddie Mac |
| Derwent London vs. Iron Mountain | Derwent London vs. Take Two Interactive Software | Derwent London vs. Cairo Communication SpA | Derwent London vs. Vitec Software 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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