Correlation Between JD SPORTS and G8 EDUCATION

Can any of the company-specific risk be diversified away by investing in both JD SPORTS and G8 EDUCATION 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 JD SPORTS and G8 EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JD SPORTS FASH and G8 EDUCATION, you can compare the effects of market volatilities on JD SPORTS and G8 EDUCATION 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 JD SPORTS with a short position of G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD SPORTS and G8 EDUCATION.

Diversification Opportunities for JD SPORTS and G8 EDUCATION

0.64

Correlation Coefficient

JD SPORTS  G8 EDUCATION

Poor diversification

The 3 months correlation between 9JD and 3EAG is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding JD SPORTS FASH and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION and JD SPORTS 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 JD SPORTS FASH are associated (or correlated) with G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of JD SPORTS i.e., JD SPORTS and G8 EDUCATION go up and down completely randomly.

Pair Corralation between JD SPORTS and G8 EDUCATION

Assuming the 90 days horizon JD SPORTS FASH is expected to under-perform the G8 EDUCATION. In addition to that, JD SPORTS is 1.53 times more volatile than G8 EDUCATION. It trades about -0.01 of its total potential returns per unit of risk. G8 EDUCATION is currently generating about 0.03 per unit of volatility. If you would invest  66.00  in G8 EDUCATION on October 4, 2024 and sell it today you would earn a total of  12.00  from holding G8 EDUCATION or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

JD SPORTS FASH  vs.  G8 EDUCATION

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

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.

G8 EDUCATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G8 EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with JD SPORTS and G8 EDUCATION

The main advantage of trading using opposite JD SPORTS and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD SPORTS position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.

The idea behind JD SPORTS FASH and G8 EDUCATION 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.