Correlation Between JD Sports and New Residential

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Can any of the company-specific risk be diversified away by investing in both JD Sports and New Residential 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 New Residential 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 New Residential Investment, you can compare the effects of market volatilities on JD Sports and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and New Residential.

Diversification Opportunities for JD Sports and New Residential

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between JD Sports and New is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of JD Sports i.e., JD Sports and New Residential go up and down completely randomly.

Pair Corralation between JD Sports and New Residential

Assuming the 90 days trading horizon JD Sports is expected to generate 15.86 times less return on investment than New Residential. In addition to that, JD Sports is 1.33 times more volatile than New Residential Investment. It trades about 0.0 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.05 per unit of volatility. If you would invest  753.00  in New Residential Investment on September 3, 2024 and sell it today you would earn a total of  377.00  from holding New Residential Investment or generate 50.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.0%
ValuesDaily Returns

JD Sports Fashion  vs.  New Residential Investment

 Performance 
       Timeline  
JD Sports Fashion 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
New Residential Inve 

Risk-Adjusted Performance

0 of 100

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

JD Sports and New Residential Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JD Sports and New Residential

The main advantage of trading using opposite JD Sports and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.
The idea behind JD Sports Fashion and New Residential Investment 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.
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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