Correlation Between JD Sports and DFS Furniture

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

Diversification Opportunities for JD Sports and DFS Furniture

-0.67

Correlation Coefficient

JD Sports  DFS Furniture

Excellent diversification

The 3 months correlation between JD Sports and DFS is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of JD Sports i.e., JD Sports and DFS Furniture go up and down completely randomly.

Pair Corralation between JD Sports and DFS Furniture

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the DFS Furniture. In addition to that, JD Sports is 1.27 times more volatile than DFS Furniture PLC. It trades about -0.02 of its total potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.0 per unit of volatility. If you would invest  15,492  in DFS Furniture PLC on October 9, 2024 and sell it today you would lose (1,492) from holding DFS Furniture PLC or give up 9.63% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  DFS Furniture 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.

DFS Furniture PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, DFS Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JD Sports and DFS Furniture

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

The idea behind JD Sports Fashion and DFS Furniture 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.