Correlation Between Emera Maine and JD Sports

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

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

Diversification Opportunities for Emera Maine and JD Sports

0.01

Correlation Coefficient

Emera Maine  JD Sports

Significant diversification

The 3 months correlation between Emera and JDDSF is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Emera Maine PFD 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 Emera Maine 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 Emera Maine PFD 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 Emera Maine i.e., Emera Maine and JD Sports go up and down completely randomly.

Pair Corralation between Emera Maine and JD Sports

Assuming the 90 days horizon Emera Maine is expected to generate 8.46 times less return on investment than JD Sports. But when comparing it to its historical volatility, Emera Maine PFD is 26.87 times less risky than JD Sports. It trades about 0.1 of its potential returns per unit of risk. JD Sports Fashion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  109.00  in JD Sports Fashion on September 27, 2024 and sell it today you would earn a total of  37.00  from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	22.48%
Values	Daily Returns

Emera Maine PFD  vs.  JD Sports Fashion

Emera Maine PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emera Maine PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Emera Maine is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Emera Maine and JD Sports

The main advantage of trading using opposite Emera Maine and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emera Maine 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 Emera Maine PFD 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.