Correlation Between JD Sports and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both JD Sports and Precision 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 Precision 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 Precision Drilling, you can compare the effects of market volatilities on JD Sports and Precision 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 Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Precision Drilling.
Diversification Opportunities for JD Sports and Precision Drilling
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JDDSF and Precision is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of JD Sports i.e., JD Sports and Precision Drilling go up and down completely randomly.
Pair Corralation between JD Sports and Precision Drilling
Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Precision Drilling. In addition to that, JD Sports is 1.76 times more volatile than Precision Drilling. It trades about -0.21 of its total potential returns per unit of risk. Precision Drilling is currently generating about 0.12 per unit of volatility. If you would invest 6,005 in Precision Drilling on September 1, 2024 and sell it today you would earn a total of 312.00 from holding Precision Drilling or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Sports Fashion vs. Precision Drilling
Performance |
| Timeline |
| JD Sports Fashion |
| Precision Drilling |
JD Sports and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Precision Drilling
The main advantage of trading using opposite JD Sports and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Precision 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.The idea behind JD Sports Fashion and Precision Drilling pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI Energy |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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