Correlation Between DOMINION and JD Sports

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

Diversification Opportunities for DOMINION and JD Sports

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between DOMINION and JDSPY is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding DOMINION ENERGY INC and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion and DOMINION 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 DOMINION ENERGY INC 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 Fashion has no effect on the direction of DOMINION i.e., DOMINION and JD Sports go up and down completely randomly.

Pair Corralation between DOMINION and JD Sports

Assuming the 90 days trading horizon DOMINION ENERGY INC is expected to under-perform the JD Sports. But the bond apears to be less risky and, when comparing its historical volatility, DOMINION ENERGY INC is 2.42 times less risky than JD Sports. The bond trades about -0.06 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  154.00  in JD Sports Fashion on September 5, 2024 and sell it today you would lose (29.00) from holding JD Sports Fashion or give up 18.83% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy61.29%
ValuesDaily Returns

DOMINION ENERGY INC  vs.  JD Sports Fashion

 Performance 
       Timeline  
DOMINION ENERGY INC 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days DOMINION ENERGY INC 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 DOMINION ENERGY INC investors.
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.

DOMINION and JD Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DOMINION and JD Sports

The main advantage of trading using opposite DOMINION and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOMINION 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' long position.
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The idea behind DOMINION ENERGY INC and JD Sports Fashion 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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