Correlation Between JD Sports and CVR Energy

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

By analyzing existing cross correlation between JD Sports Fashion and CVR Energy, you can compare the effects of market volatilities on JD Sports and CVR Energy 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 CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and CVR Energy.

Diversification Opportunities for JD Sports and CVR Energy

0.62

Correlation Coefficient

JD Sports  CVR Energy

Poor diversification

The 3 months correlation between JD Sports and CVR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy 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 Fashion are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of JD Sports i.e., JD Sports and CVR Energy go up and down completely randomly.

Pair Corralation between JD Sports and CVR Energy

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the CVR Energy. But the stock apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.51 times less risky than CVR Energy. The stock trades about -0.18 of its potential returns per unit of risk. The CVR Energy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,216  in CVR Energy on September 13, 2024 and sell it today you would lose (248.00) from holding CVR Energy or give up 11.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

JD Sports Fashion  vs.  CVR Energy

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

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CVR Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JD Sports and CVR Energy

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

The idea behind JD Sports Fashion and CVR Energy 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.