Correlation Between JD Sports and Veren

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

Diversification Opportunities for JD Sports and Veren

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JDSPY and Veren is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Veren Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veren Inc 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 Veren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veren Inc has no effect on the direction of JD Sports i.e., JD Sports and Veren go up and down completely randomly.

Pair Corralation between JD Sports and Veren

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Veren. In addition to that, JD Sports is 3.46 times more volatile than Veren Inc. It trades about -0.06 of its total potential returns per unit of risk. Veren Inc is currently generating about -0.13 per unit of volatility. If you would invest  521.00  in Veren Inc on September 12, 2024 and sell it today you would lose (26.00) from holding Veren Inc or give up 4.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JD Sports Fashion  vs.  Veren Inc

 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 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.
Veren Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Veren Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic 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 Veren Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JD Sports and Veren

The main advantage of trading using opposite JD Sports and Veren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Veren 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 Veren will offset losses from the drop in Veren's long position.
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The idea behind JD Sports Fashion and Veren Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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