Correlation Between Adidas AG and JD SPORTS
Can any of the company-specific risk be diversified away by investing in both Adidas AG 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 Adidas AG and JD SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between adidas AG and JD SPORTS FASH, you can compare the effects of market volatilities on Adidas AG 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 Adidas AG with a short position of JD SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and JD SPORTS.
Diversification Opportunities for Adidas AG and JD SPORTS
Pay attention - limited upside
The 3 months correlation between Adidas and 9JD is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and JD SPORTS FASH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD SPORTS FASH and Adidas AG 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 adidas AG 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 FASH has no effect on the direction of Adidas AG i.e., Adidas AG and JD SPORTS go up and down completely randomly.
Pair Corralation between Adidas AG and JD SPORTS
Assuming the 90 days trading horizon adidas AG is expected to generate 0.5 times more return on investment than JD SPORTS. However, adidas AG is 1.99 times less risky than JD SPORTS. It trades about 0.2 of its potential returns per unit of risk. JD SPORTS FASH is currently generating about -0.2 per unit of risk. If you would invest 10,500 in adidas AG on October 27, 2024 and sell it today you would earn a total of 2,400 from holding adidas AG or generate 22.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
adidas AG vs. JD SPORTS FASH
Performance |
Timeline |
adidas AG |
JD SPORTS FASH |
Adidas AG and JD SPORTS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Adidas AG and JD SPORTS
The main advantage of trading using opposite Adidas AG and JD SPORTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG 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's long position.Adidas AG vs. ELMOS SEMICONDUCTOR | ||
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Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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