Correlation Between JD Sports and Smurfit WestRock
Can any of the company-specific risk be diversified away by investing in both JD Sports and Smurfit WestRock 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 Smurfit WestRock 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 Smurfit WestRock plc, you can compare the effects of market volatilities on JD Sports and Smurfit WestRock 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 Smurfit WestRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Smurfit WestRock.
Diversification Opportunities for JD Sports and Smurfit WestRock
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JDDSF and Smurfit is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Smurfit WestRock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit WestRock 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 Smurfit WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit WestRock plc has no effect on the direction of JD Sports i.e., JD Sports and Smurfit WestRock go up and down completely randomly.
Pair Corralation between JD Sports and Smurfit WestRock
Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Smurfit WestRock. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.23 times less risky than Smurfit WestRock. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Smurfit WestRock plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,515 in Smurfit WestRock plc on September 2, 2024 and sell it today you would earn a total of 1,987 from holding Smurfit WestRock plc or generate 56.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 70.7% |
| Values | Daily Returns |
JD Sports Fashion vs. Smurfit WestRock plc
Performance |
| Timeline |
| JD Sports Fashion |
| Smurfit WestRock plc |
JD Sports and Smurfit WestRock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Smurfit WestRock
The main advantage of trading using opposite JD Sports and Smurfit WestRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Smurfit WestRock 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 Smurfit WestRock will offset losses from the drop in Smurfit WestRock's long position.The idea behind JD Sports Fashion and Smurfit WestRock plc 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.| Smurfit WestRock vs. Church Dwight | Smurfit WestRock vs. Keurig Dr Pepper | Smurfit WestRock vs. Suntory Beverage Food | Smurfit WestRock vs. Lincoln Electric Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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