Correlation Between JD Sports and Ithaca Energy

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

Diversification Opportunities for JD Sports and Ithaca Energy

-0.66

Correlation Coefficient

JD Sports  Ithaca Energy

Excellent diversification

The 3 months correlation between JD Sports and Ithaca is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Ithaca Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ithaca Energy 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 Ithaca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ithaca Energy PLC has no effect on the direction of JD Sports i.e., JD Sports and Ithaca Energy go up and down completely randomly.

Pair Corralation between JD Sports and Ithaca Energy

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Ithaca Energy. In addition to that, JD Sports is 1.06 times more volatile than Ithaca Energy PLC. It trades about -0.03 of its total potential returns per unit of risk. Ithaca Energy PLC is currently generating about 0.01 per unit of volatility. If you would invest  14,242  in Ithaca Energy PLC on October 24, 2024 and sell it today you would lose (502.00) from holding Ithaca Energy PLC or give up 3.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

JD Sports Fashion  vs.  Ithaca Energy 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.

Ithaca Energy PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ithaca Energy PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ithaca Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Ithaca Energy

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

The idea behind JD Sports Fashion and Ithaca Energy 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.