Correlation Between JD Sports and Hafnia

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Can any of the company-specific risk be diversified away by investing in both JD Sports and Hafnia 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 Hafnia 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 Hafnia Limited, you can compare the effects of market volatilities on JD Sports and Hafnia 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 Hafnia. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Hafnia.

Diversification Opportunities for JD Sports and Hafnia

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JDSPY and Hafnia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of JD Sports i.e., JD Sports and Hafnia go up and down completely randomly.

Pair Corralation between JD Sports and Hafnia

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Hafnia. In addition to that, JD Sports is 2.38 times more volatile than Hafnia Limited. It trades about -0.1 of its total potential returns per unit of risk. Hafnia Limited is currently generating about -0.01 per unit of volatility. If you would invest  569.00  in Hafnia Limited on September 4, 2024 and sell it today you would lose (6.00) from holding Hafnia Limited or give up 1.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JD Sports Fashion  vs.  Hafnia Limited

 Performance 
       Timeline  
JD Sports Fashion 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Hafnia Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

JD Sports and Hafnia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JD Sports and Hafnia

The main advantage of trading using opposite JD Sports and Hafnia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Hafnia 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 Hafnia will offset losses from the drop in Hafnia's long position.
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The idea behind JD Sports Fashion and Hafnia Limited 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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