Correlation Between JD Sports and GILEAD

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

Diversification Opportunities for JD Sports and GILEAD

0.32

Correlation Coefficient

JD Sports  GILEAD

Weak diversification

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

Pair Corralation between JD Sports and GILEAD

Assuming the 90 days horizon JD Sports Fashion is expected to generate 17.38 times more return on investment than GILEAD. However, JD Sports is 17.38 times more volatile than GILEAD SCIENCES INC. It trades about 0.03 of its potential returns per unit of risk. GILEAD SCIENCES INC is currently generating about -0.01 per unit of risk. If you would invest  109.00  in JD Sports Fashion on October 11, 2024 and sell it today you would earn a total of  37.00  from holding JD Sports Fashion or generate 33.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

JD Sports Fashion  vs.  GILEAD SCIENCES INC

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.

GILEAD SCIENCES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GILEAD SCIENCES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GILEAD is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JD Sports and GILEAD

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

The idea behind JD Sports Fashion and GILEAD SCIENCES INC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.