Correlation Between JD Sports and Ardagh

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

Diversification Opportunities for JD Sports and Ardagh

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between JDSPY and Ardagh is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Ardagh Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Holdings USA 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 Ardagh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Holdings USA has no effect on the direction of JD Sports i.e., JD Sports and Ardagh go up and down completely randomly.

Pair Corralation between JD Sports and Ardagh

Assuming the 90 days horizon JD Sports is expected to generate 49.15 times less return on investment than Ardagh. But when comparing it to its historical volatility, JD Sports Fashion is 11.07 times less risky than Ardagh. It trades about 0.01 of its potential returns per unit of risk. Ardagh Holdings USA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,766  in Ardagh Holdings USA on September 3, 2024 and sell it today you would lose (2,316) from holding Ardagh Holdings USA or give up 29.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy83.43%
ValuesDaily Returns

JD Sports Fashion  vs.  Ardagh Holdings USA

 Performance 
       Timeline  
JD Sports Fashion 

Risk-Adjusted Performance

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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 conflicting 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.
Ardagh Holdings USA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ardagh Holdings USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat 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 Ardagh Holdings USA investors.

JD Sports and Ardagh Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JD Sports and Ardagh

The main advantage of trading using opposite JD Sports and Ardagh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Ardagh 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 Ardagh will offset losses from the drop in Ardagh's long position.
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The idea behind JD Sports Fashion and Ardagh Holdings USA 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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