Correlation Between JD Sports and AJ Bell

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

Diversification Opportunities for JD Sports and AJ Bell

0.13

Correlation Coefficient

JD Sports  AJ Bell

Average diversification

The 3 months correlation between JD Sports and AJB is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and AJ Bell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Bell plc 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 AJ Bell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Bell plc has no effect on the direction of JD Sports i.e., JD Sports and AJ Bell go up and down completely randomly.

Pair Corralation between JD Sports and AJ Bell

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the AJ Bell. In addition to that, JD Sports is 1.71 times more volatile than AJ Bell plc. It trades about -0.23 of its total potential returns per unit of risk. AJ Bell plc is currently generating about 0.01 per unit of volatility. If you would invest  45,587  in AJ Bell plc on October 24, 2024 and sell it today you would earn a total of  163.00  from holding AJ Bell plc or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

JD Sports Fashion  vs.  AJ Bell plc

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AJ Bell plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AJ Bell plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AJ Bell is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JD Sports and AJ Bell

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

The idea behind JD Sports Fashion and AJ Bell plc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.