Correlation Between JD Sports and Advanced Medical

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

Diversification Opportunities for JD Sports and Advanced Medical

0.39

Correlation Coefficient

JD Sports  Advanced Medical

Weak diversification

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

Pair Corralation between JD Sports and Advanced Medical

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Advanced Medical. But the stock apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.03 times less risky than Advanced Medical. The stock trades about -0.11 of its potential returns per unit of risk. The Advanced Medical Solutions is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  24,115  in Advanced Medical Solutions on September 3, 2024 and sell it today you would lose (2,815) from holding Advanced Medical Solutions or give up 11.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  Advanced Medical Solutions

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

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with JD Sports and Advanced Medical

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

The idea behind JD Sports Fashion and Advanced Medical Solutions 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.