Correlation Between Innovative Industrial and JD Sports

Can any of the company-specific risk be diversified away by investing in both Innovative Industrial 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 Innovative Industrial and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innovative Industrial Properties and JD Sports Fashion, you can compare the effects of market volatilities on Innovative Industrial 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 Innovative Industrial with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Industrial and JD Sports.

Diversification Opportunities for Innovative Industrial and JD Sports

0.83

Correlation Coefficient

Innovative Industrial  JD Sports

Very poor diversification

The 3 months correlation between Innovative and JD Sports is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Industrial Properti 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 Innovative Industrial 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 Innovative Industrial Properties 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 Innovative Industrial i.e., Innovative Industrial and JD Sports go up and down completely randomly.

Pair Corralation between Innovative Industrial and JD Sports

Assuming the 90 days trading horizon Innovative Industrial Properties is expected to generate 13.52 times more return on investment than JD Sports. However, Innovative Industrial is 13.52 times more volatile than JD Sports Fashion. It trades about 0.06 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.05 per unit of risk. If you would invest  9,259  in Innovative Industrial Properties on September 14, 2024 and sell it today you would earn a total of  1,177  from holding Innovative Industrial Properties or generate 12.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Innovative Industrial Properti  vs.  JD Sports Fashion

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

JD Sports Fashion

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Innovative Industrial and JD Sports

The main advantage of trading using opposite Innovative Industrial and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Industrial 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 Innovative Industrial Properties 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.