Correlation Between JD Sports and Virgin Group

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

Diversification Opportunities for JD Sports and Virgin Group

-0.27

Correlation Coefficient

JD Sports  Virgin Group

Very good diversification

The 3 months correlation between JDDSF and Virgin is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of JD Sports i.e., JD Sports and Virgin Group go up and down completely randomly.

Pair Corralation between JD Sports and Virgin Group

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Virgin Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.31 times less risky than Virgin Group. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Virgin Group Acquisition is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Virgin Group Acquisition on October 23, 2024 and sell it today you would lose (3.00) from holding Virgin Group Acquisition or give up 2.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  Virgin Group Acquisition

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 uncertain 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.

Virgin Group Acquisition

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Virgin Group is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with JD Sports and Virgin Group

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

The idea behind JD Sports Fashion and Virgin Group Acquisition 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.