Correlation Between Air Products and JD Sports

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

Diversification Opportunities for Air Products and JD Sports

AirJD SportsDiversified AwayAirJD SportsDiversified Away100%
-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Air and JD Sports is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals 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 Air Products 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 Air Products Chemicals 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 Air Products i.e., Air Products and JD Sports go up and down completely randomly.

Pair Corralation between Air Products and JD Sports

Assuming the 90 days trading horizon Air Products Chemicals is expected to generate 0.44 times more return on investment than JD Sports. However, Air Products Chemicals is 2.25 times less risky than JD Sports. It trades about -0.02 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.13 per unit of risk. If you would invest  32,263  in Air Products Chemicals on November 19, 2024 and sell it today you would lose (645.00) from holding Air Products Chemicals or give up 2.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.39%
ValuesDaily Returns

Air Products Chemicals  vs.  JD Sports Fashion

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -30-20-10010
JavaScript chart by amCharts 3.21.150HBH JD
       Timeline  
Air Products Chemicals 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Air Products Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Air Products is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb290300310320330340
JD Sports Fashion 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb80859095100105

Air Products and JD Sports Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.66-3.49-2.32-1.15-0.01951.132.313.54.695.88 0.050.100.15
JavaScript chart by amCharts 3.21.150HBH JD
       Returns  

Pair Trading with Air Products and JD Sports

The main advantage of trading using opposite Air Products and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.
The idea behind Air Products Chemicals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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