Correlation Between JD Sports and Empresa Distribuidora

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

Diversification Opportunities for JD Sports and Empresa Distribuidora

0.65

Correlation Coefficient

JD Sports  Empresa Distribuidora

Poor diversification

The 3 months correlation between JDDSF and Empresa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of JD Sports i.e., JD Sports and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between JD Sports and Empresa Distribuidora

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Empresa Distribuidora. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.51 times less risky than Empresa Distribuidora. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Empresa Distribuidora y is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,307  in Empresa Distribuidora y on December 28, 2024 and sell it today you would lose (1,171) from holding Empresa Distribuidora y or give up 27.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

JD Sports Fashion  vs.  Empresa Distribuidora y

JD Sports Fashion

Risk-Adjusted Performance

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

Empresa Distribuidora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empresa Distribuidora y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with JD Sports and Empresa Distribuidora

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

The idea behind JD Sports Fashion and Empresa Distribuidora y 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.