Correlation Between JD Sports and AKITA Drilling

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

Diversification Opportunities for JD Sports and AKITA Drilling

0.1

Correlation Coefficient

JD Sports  AKITA Drilling

Average diversification

The 3 months correlation between JDDSF and AKITA is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling 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 AKITA Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKITA Drilling has no effect on the direction of JD Sports i.e., JD Sports and AKITA Drilling go up and down completely randomly.

Pair Corralation between JD Sports and AKITA Drilling

Assuming the 90 days horizon JD Sports Fashion is expected to generate 1.55 times more return on investment than AKITA Drilling. However, JD Sports is 1.55 times more volatile than AKITA Drilling. It trades about 0.03 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.01 per unit of risk. If you would invest  109.00  in JD Sports Fashion on September 18, 2024 and sell it today you would earn a total of  37.00  from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

JD Sports Fashion  vs.  AKITA Drilling

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. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AKITA Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and AKITA Drilling

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

The idea behind JD Sports Fashion and AKITA Drilling 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.