Correlation Between JD Sports and Codexis

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

Diversification Opportunities for JD Sports and Codexis

-0.7

Correlation Coefficient

JD Sports  Codexis

Excellent diversification

The 3 months correlation between JDDSF and Codexis is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of JD Sports i.e., JD Sports and Codexis go up and down completely randomly.

Pair Corralation between JD Sports and Codexis

Assuming the 90 days horizon JD Sports Fashion is expected to generate 0.83 times more return on investment than Codexis. However, JD Sports Fashion is 1.2 times less risky than Codexis. It trades about 0.03 of its potential returns per unit of risk. Codexis is currently generating about 0.02 per unit of risk. If you would invest  109.00  in JD Sports Fashion on October 5, 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  Codexis

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Codexis

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Codexis

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

The idea behind JD Sports Fashion and Codexis 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.