Correlation Between JD Sports and VHAI

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

Diversification Opportunities for JD Sports and VHAI

0.0

Correlation Coefficient

JD Sports  VHAI

Pay attention - limited upside

The 3 months correlation between JDDSF and VHAI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI 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 VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of JD Sports i.e., JD Sports and VHAI go up and down completely randomly.

Pair Corralation between JD Sports and VHAI

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the VHAI. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 4.12 times less risky than VHAI. The pink sheet trades about -0.04 of its potential returns per unit of risk. The VHAI is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.55  in VHAI on October 8, 2024 and sell it today you would earn a total of  0.02  from holding VHAI or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	61.29%
Values	Daily Returns

JD Sports Fashion  vs.  VHAI

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.

VHAI

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly conflicting basic indicators, VHAI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and VHAI

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

The idea behind JD Sports Fashion and VHAI 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.