Correlation Between IB Acquisition and JD Sports

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

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

Diversification Opportunities for IB Acquisition and JD Sports

-0.6

Correlation Coefficient

IB Acquisition  JD Sports

Excellent diversification

The 3 months correlation between IBAC and JDSPY is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding IB Acquisition Corp 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 IB Acquisition 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 IB Acquisition Corp 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 IB Acquisition i.e., IB Acquisition and JD Sports go up and down completely randomly.

Pair Corralation between IB Acquisition and JD Sports

Given the investment horizon of 90 days IB Acquisition Corp is expected to generate 0.05 times more return on investment than JD Sports. However, IB Acquisition Corp is 20.81 times less risky than JD Sports. It trades about 0.17 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.09 per unit of risk. If you would invest  1,011  in IB Acquisition Corp on December 26, 2024 and sell it today you would earn a total of  17.00  from holding IB Acquisition Corp or generate 1.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

IB Acquisition Corp  vs.  JD Sports Fashion

IB Acquisition Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IB Acquisition is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IB Acquisition and JD Sports

The main advantage of trading using opposite IB Acquisition and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IB Acquisition 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 IB Acquisition Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.