Correlation Between JD Sports and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both JD Sports and Insteel Industries 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 Insteel Industries 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 Insteel Industries, you can compare the effects of market volatilities on JD Sports and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Insteel Industries.
Diversification Opportunities for JD Sports and Insteel Industries
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JDDSF and Insteel is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of JD Sports i.e., JD Sports and Insteel Industries go up and down completely randomly.
Pair Corralation between JD Sports and Insteel Industries
Assuming the 90 days horizon JD Sports Fashion is expected to generate 2.1 times more return on investment than Insteel Industries. However, JD Sports is 2.1 times more volatile than Insteel Industries. It trades about 0.03 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.02 per unit of risk. If you would invest 109.00 in JD Sports Fashion on September 12, 2024 and sell it today you would earn a total of 37.00 from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
JD Sports Fashion vs. Insteel Industries
Performance |
| Timeline |
| JD Sports Fashion |
| Insteel Industries |
JD Sports and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Insteel Industries
The main advantage of trading using opposite JD Sports and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.| JD Sports vs. Burlington Stores | JD Sports vs. Childrens Place | JD Sports vs. Buckle Inc | JD Sports vs. Shoe Carnival |
| Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp | Insteel Industries vs. Northwest Pipe |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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