Correlation Between JD Sports and ECD Automotive

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

Diversification Opportunities for JD Sports and ECD Automotive

0.71

Correlation Coefficient

JD Sports  ECD Automotive

Poor diversification

The 3 months correlation between JDDSF and ECD is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design 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 ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of JD Sports i.e., JD Sports and ECD Automotive go up and down completely randomly.

Pair Corralation between JD Sports and ECD Automotive

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the ECD Automotive. In addition to that, JD Sports is 1.28 times more volatile than ECD Automotive Design. It trades about -0.24 of its total potential returns per unit of risk. ECD Automotive Design is currently generating about 0.02 per unit of volatility. If you would invest  96.00  in ECD Automotive Design on October 26, 2024 and sell it today you would earn a total of  0.49  from holding ECD Automotive Design or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

JD Sports Fashion  vs.  ECD Automotive Design

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JD Sports and ECD Automotive

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

The idea behind JD Sports Fashion and ECD Automotive Design 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 CEOs Directory module to screen CEOs from public companies around the world.