Correlation Between JD Sports and Thor Industries

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

Diversification Opportunities for JD Sports and Thor Industries

0.39

Correlation Coefficient

JD Sports  Thor Industries

Weak diversification

The 3 months correlation between JDDSF and Thor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of JD Sports i.e., JD Sports and Thor Industries go up and down completely randomly.

Pair Corralation between JD Sports and Thor Industries

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Thor Industries. In addition to that, JD Sports is 1.48 times more volatile than Thor Industries. It trades about -0.16 of its total potential returns per unit of risk. Thor Industries is currently generating about -0.16 per unit of volatility. If you would invest  10,885  in Thor Industries on October 9, 2024 and sell it today you would lose (1,293) from holding Thor Industries or give up 11.88% 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.  Thor Industries

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with JD Sports and Thor Industries

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

The idea behind JD Sports Fashion and Thor Industries 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.