Correlation Between JD Sports and Cheer Holding

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

Diversification Opportunities for JD Sports and Cheer Holding

0.36

Correlation Coefficient

JD Sports  Cheer Holding

Weak diversification

The 3 months correlation between JDDSF and Cheer is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Cheer Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheer Holding 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 Cheer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheer Holding has no effect on the direction of JD Sports i.e., JD Sports and Cheer Holding go up and down completely randomly.

Pair Corralation between JD Sports and Cheer Holding

Assuming the 90 days horizon JD Sports Fashion is expected to generate 0.93 times more return on investment than Cheer Holding. However, JD Sports Fashion is 1.08 times less risky than Cheer Holding. It trades about 0.03 of its potential returns per unit of risk. Cheer Holding is currently generating about -0.04 per unit of risk. If you would invest  109.00  in JD Sports Fashion on October 10, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  Cheer Holding

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.

Cheer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheer Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with JD Sports and Cheer Holding

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

The idea behind JD Sports Fashion and Cheer Holding 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.