Correlation Between JD Sports and Falcon Oil

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

Diversification Opportunities for JD Sports and Falcon Oil

0.92

Correlation Coefficient

JD Sports  Falcon Oil

Almost no diversification

The 3 months correlation between JD Sports and Falcon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas 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 Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of JD Sports i.e., JD Sports and Falcon Oil go up and down completely randomly.

Pair Corralation between JD Sports and Falcon Oil

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Falcon Oil. In addition to that, JD Sports is 1.67 times more volatile than Falcon Oil Gas. It trades about -0.21 of its total potential returns per unit of risk. Falcon Oil Gas is currently generating about -0.14 per unit of volatility. If you would invest  485.00  in Falcon Oil Gas on September 15, 2024 and sell it today you would lose (77.00) from holding Falcon Oil Gas or give up 15.88% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  Falcon Oil Gas

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.

Falcon Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Oil Gas 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 technical and fundamental 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.

Pair Trading with JD Sports and Falcon Oil

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

The idea behind JD Sports Fashion and Falcon Oil Gas 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.