Correlation Between JD Sports and L3Harris Technologies

Can any of the company-specific risk be diversified away by investing in both JD Sports and L3Harris Technologies 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 L3Harris Technologies 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 L3Harris Technologies, you can compare the effects of market volatilities on JD Sports and L3Harris Technologies 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 L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and L3Harris Technologies.

Diversification Opportunities for JD Sports and L3Harris Technologies

0.65

Correlation Coefficient

JD Sports  L3Harris Technologies

Poor diversification

The 3 months correlation between JD Sports and L3Harris is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies 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 L3Harris Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3Harris Technologies has no effect on the direction of JD Sports i.e., JD Sports and L3Harris Technologies go up and down completely randomly.

Pair Corralation between JD Sports and L3Harris Technologies

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the L3Harris Technologies. In addition to that, JD Sports is 2.21 times more volatile than L3Harris Technologies. It trades about -0.18 of its total potential returns per unit of risk. L3Harris Technologies is currently generating about -0.28 per unit of volatility. If you would invest  24,873  in L3Harris Technologies on October 6, 2024 and sell it today you would lose (4,079) from holding L3Harris Technologies or give up 16.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

JD Sports Fashion  vs.  L3Harris Technologies

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.

L3Harris Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L3Harris Technologies 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with JD Sports and L3Harris Technologies

The main advantage of trading using opposite JD Sports and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, L3Harris Technologies 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 L3Harris Technologies will offset losses from the drop in L3Harris Technologies' long position.

The idea behind JD Sports Fashion and L3Harris Technologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.