Correlation Between ScanSource and JD SPORTS

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Can any of the company-specific risk be diversified away by investing in both ScanSource and JD SPORTS 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 ScanSource and JD SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and JD SPORTS FASH, you can compare the effects of market volatilities on ScanSource and JD SPORTS 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 ScanSource with a short position of JD SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and JD SPORTS.

Diversification Opportunities for ScanSource and JD SPORTS

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between ScanSource and 9JD is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and JD SPORTS FASH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD SPORTS FASH and ScanSource 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 ScanSource are associated (or correlated) with JD SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD SPORTS FASH has no effect on the direction of ScanSource i.e., ScanSource and JD SPORTS go up and down completely randomly.

Pair Corralation between ScanSource and JD SPORTS

Assuming the 90 days horizon ScanSource is expected to generate 0.67 times more return on investment than JD SPORTS. However, ScanSource is 1.48 times less risky than JD SPORTS. It trades about 0.05 of its potential returns per unit of risk. JD SPORTS FASH is currently generating about -0.03 per unit of risk. If you would invest  3,260  in ScanSource on October 26, 2024 and sell it today you would earn a total of  1,600  from holding ScanSource or generate 49.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ScanSource  vs.  JD SPORTS FASH

 Performance 
       Timeline  
ScanSource 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ScanSource reported solid returns over the last few months and may actually be approaching a breakup point.
JD SPORTS FASH 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ScanSource and JD SPORTS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ScanSource and JD SPORTS

The main advantage of trading using opposite ScanSource and JD SPORTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, JD SPORTS 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 JD SPORTS will offset losses from the drop in JD SPORTS's long position.
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The idea behind ScanSource and JD SPORTS FASH 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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