Correlation Between JD Sports and Torm PLC

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

Diversification Opportunities for JD Sports and Torm PLC

0.32

Correlation Coefficient

JD Sports  Torm PLC

Weak diversification

The 3 months correlation between JDDSF and Torm is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class 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 Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of JD Sports i.e., JD Sports and Torm PLC go up and down completely randomly.

Pair Corralation between JD Sports and Torm PLC

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Torm PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.16 times less risky than Torm PLC. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Torm PLC Class is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,818  in Torm PLC Class on December 27, 2024 and sell it today you would lose (50.00) from holding Torm PLC Class or give up 2.75% 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.  Torm PLC Class

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.

Torm PLC Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Torm PLC Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Torm PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JD Sports and Torm PLC

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

The idea behind JD Sports Fashion and Torm PLC Class 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.