Correlation Between JD Sports and Postal Realty

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

Diversification Opportunities for JD Sports and Postal Realty

0.37

Correlation Coefficient

JD Sports  Postal Realty

Weak diversification

The 3 months correlation between JDDSF and Postal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Postal Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Realty Trust 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 Postal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Realty Trust has no effect on the direction of JD Sports i.e., JD Sports and Postal Realty go up and down completely randomly.

Pair Corralation between JD Sports and Postal Realty

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Postal Realty. In addition to that, JD Sports is 2.5 times more volatile than Postal Realty Trust. It trades about -0.04 of its total potential returns per unit of risk. Postal Realty Trust is currently generating about -0.02 per unit of volatility. If you would invest  1,416  in Postal Realty Trust on September 5, 2024 and sell it today you would lose (23.00) from holding Postal Realty Trust or give up 1.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  Postal Realty Trust

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 nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Postal Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postal Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Postal Realty is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with JD Sports and Postal Realty

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

The idea behind JD Sports Fashion and Postal Realty Trust 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.