Correlation Between JD Sports and Office Properties

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

Diversification Opportunities for JD Sports and Office Properties

0.41

Correlation Coefficient

JD Sports  Office Properties

Very weak diversification

The 3 months correlation between JDDSF and Office is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income 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 Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of JD Sports i.e., JD Sports and Office Properties go up and down completely randomly.

Pair Corralation between JD Sports and Office Properties

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Office Properties. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.03 times less risky than Office Properties. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Office Properties Income is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,167  in Office Properties Income on December 20, 2024 and sell it today you would lose (197.00) from holding Office Properties Income or give up 16.88% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  Office Properties Income

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 uncertain 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.

Office Properties Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Office Properties Income 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 basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with JD Sports and Office Properties

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

The idea behind JD Sports Fashion and Office Properties Income 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.