Correlation Between JD Sports and Alfa Financial

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

Diversification Opportunities for JD Sports and Alfa Financial

-0.28

Correlation Coefficient

JD Sports  Alfa Financial

Very good diversification

The 3 months correlation between JD Sports and Alfa is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of JD Sports i.e., JD Sports and Alfa Financial go up and down completely randomly.

Pair Corralation between JD Sports and Alfa Financial

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Alfa Financial. In addition to that, JD Sports is 1.47 times more volatile than Alfa Financial Software. It trades about -0.19 of its total potential returns per unit of risk. Alfa Financial Software is currently generating about 0.1 per unit of volatility. If you would invest  21,900  in Alfa Financial Software on December 1, 2024 and sell it today you would earn a total of  2,050  from holding Alfa Financial Software or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  Alfa Financial Software

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

Alfa Financial Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JD Sports and Alfa Financial

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

The idea behind JD Sports Fashion and Alfa Financial Software 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.