Correlation Between JD Sports and Scilex Holding
Can any of the company-specific risk be diversified away by investing in both JD Sports and Scilex Holding 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 Scilex Holding 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 Scilex Holding, you can compare the effects of market volatilities on JD Sports and Scilex Holding 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 Scilex Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Scilex Holding.
Diversification Opportunities for JD Sports and Scilex Holding
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between JDDSF and Scilex is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of JD Sports i.e., JD Sports and Scilex Holding go up and down completely randomly.
Pair Corralation between JD Sports and Scilex Holding
Assuming the 90 days horizon JD Sports is expected to generate 4.67 times less return on investment than Scilex Holding. But when comparing it to its historical volatility, JD Sports Fashion is 2.78 times less risky than Scilex Holding. It trades about 0.03 of its potential returns per unit of risk. Scilex Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 59.00 in Scilex Holding on August 31, 2024 and sell it today you would lose (30.00) from holding Scilex Holding or give up 50.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.16% |
| Values | Daily Returns |
JD Sports Fashion vs. Scilex Holding
Performance |
| Timeline |
| JD Sports Fashion |
| Scilex Holding |
JD Sports and Scilex Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Scilex Holding
The main advantage of trading using opposite JD Sports and Scilex Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Scilex Holding 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 Scilex Holding will offset losses from the drop in Scilex Holding's long position.The idea behind JD Sports Fashion and Scilex Holding 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.| Scilex Holding vs. Daily Journal Corp | Scilex Holding vs. Alaska Air Group | Scilex Holding vs. 51Talk Online Education | Scilex Holding vs. HF Sinclair Corp |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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