Correlation Between JD Sports and Lake Resources

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

Diversification Opportunities for JD Sports and Lake Resources

0.72

Correlation Coefficient

JD Sports  Lake Resources

Poor diversification

The 3 months correlation between JDDSF and Lake is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of JD Sports i.e., JD Sports and Lake Resources go up and down completely randomly.

Pair Corralation between JD Sports and Lake Resources

Assuming the 90 days horizon JD Sports Fashion is expected to generate 0.55 times more return on investment than Lake Resources. However, JD Sports Fashion is 1.82 times less risky than Lake Resources. It trades about -0.18 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.12 per unit of risk. If you would invest  177.00  in JD Sports Fashion on October 25, 2024 and sell it today you would lose (60.00) from holding JD Sports Fashion or give up 33.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

JD Sports Fashion  vs.  Lake Resources NL

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.

Lake Resources NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward-looking signals 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.

Pair Trading with JD Sports and Lake Resources

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

The idea behind JD Sports Fashion and Lake Resources NL 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.