Correlation Between JD Sports and National CineMedia
Can any of the company-specific risk be diversified away by investing in both JD Sports and National CineMedia 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 National CineMedia 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 National CineMedia, you can compare the effects of market volatilities on JD Sports and National CineMedia 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 National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and National CineMedia.
Diversification Opportunities for JD Sports and National CineMedia
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between JDDSF and National is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of JD Sports i.e., JD Sports and National CineMedia go up and down completely randomly.
Pair Corralation between JD Sports and National CineMedia
Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the National CineMedia. In addition to that, JD Sports is 1.26 times more volatile than National CineMedia. It trades about -0.17 of its total potential returns per unit of risk. National CineMedia is currently generating about -0.07 per unit of volatility. If you would invest 711.00 in National CineMedia on December 5, 2024 and sell it today you would lose (72.50) from holding National CineMedia or give up 10.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.33% |
Values | Daily Returns |
JD Sports Fashion vs. National CineMedia
Performance |
Timeline |
JD Sports Fashion |
National CineMedia |
JD Sports and National CineMedia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with JD Sports and National CineMedia
The main advantage of trading using opposite JD Sports and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, National CineMedia 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 National CineMedia will offset losses from the drop in National CineMedia's long position.The idea behind JD Sports Fashion and National CineMedia 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.National CineMedia vs. Baosheng Media Group | National CineMedia vs. Impact Fusion International | National CineMedia vs. ZW Data Action |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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