Correlation Between JD Sports and Edita Food

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

Diversification Opportunities for JD Sports and Edita Food

0.63

Correlation Coefficient

JD Sports  Edita Food

Poor diversification

The 3 months correlation between JD Sports and Edita is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries 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 Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of JD Sports i.e., JD Sports and Edita Food go up and down completely randomly.

Pair Corralation between JD Sports and Edita Food

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Edita Food. But the stock apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.12 times less risky than Edita Food. The stock trades about -0.11 of its potential returns per unit of risk. The Edita Food Industries is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  246.00  in Edita Food Industries on September 4, 2024 and sell it today you would lose (46.00) from holding Edita Food Industries or give up 18.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

JD Sports Fashion  vs.  Edita Food Industries

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.

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food Industries 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 comparatively stable which may send shares a bit higher in January 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 Edita Food

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

The idea behind JD Sports Fashion and Edita Food Industries 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..