Correlation Between Aberforth Smaller and JD Sports

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

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

Diversification Opportunities for Aberforth Smaller and JD Sports

0.23

Correlation Coefficient

Aberforth Smaller  JD Sports

Modest diversification

The 3 months correlation between Aberforth and JD Sports is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aberforth Smaller Companies 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 Aberforth Smaller 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 Aberforth Smaller Companies 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 Aberforth Smaller i.e., Aberforth Smaller and JD Sports go up and down completely randomly.

Pair Corralation between Aberforth Smaller and JD Sports

Assuming the 90 days trading horizon Aberforth Smaller Companies is expected to generate 0.34 times more return on investment than JD Sports. However, Aberforth Smaller Companies is 2.98 times less risky than JD Sports. It trades about -0.09 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.23 per unit of risk. If you would invest  152,000  in Aberforth Smaller Companies on October 25, 2024 and sell it today you would lose (8,600) from holding Aberforth Smaller Companies or give up 5.66% of portfolio value over 90 days.

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

Aberforth Smaller Companies  vs.  JD Sports Fashion

Aberforth Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aberforth Smaller is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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

Pair Trading with Aberforth Smaller and JD Sports

The main advantage of trading using opposite Aberforth Smaller and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberforth Smaller 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 Aberforth Smaller Companies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..