Correlation Between Bath Body and JD Sports

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

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

Diversification Opportunities for Bath Body and JD Sports

0.44

Correlation Coefficient

Bath Body  JD Sports

Very weak diversification

The 3 months correlation between Bath and JD Sports is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bath Body Works 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 Bath Body 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 Bath Body Works 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 Bath Body i.e., Bath Body and JD Sports go up and down completely randomly.

Pair Corralation between Bath Body and JD Sports

Assuming the 90 days trading horizon Bath Body Works is expected to under-perform the JD Sports. In addition to that, Bath Body is 1.04 times more volatile than JD Sports Fashion. It trades about -0.12 of its total potential returns per unit of risk. JD Sports Fashion is currently generating about -0.12 per unit of volatility. If you would invest  9,408  in JD Sports Fashion on December 23, 2024 and sell it today you would lose (1,832) from holding JD Sports Fashion or give up 19.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Bath Body Works  vs.  JD Sports Fashion

Bath Body Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bath Body Works 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 comparatively stable which may send shares a bit higher in April 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

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

Pair Trading with Bath Body and JD Sports

The main advantage of trading using opposite Bath Body and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bath Body 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 Bath Body Works 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.