Correlation Between JD Sports and Contagious Gaming

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

Diversification Opportunities for JD Sports and Contagious Gaming

0.0

Correlation Coefficient

JD Sports  Contagious Gaming

Pay attention - limited upside

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

Pair Corralation between JD Sports and Contagious Gaming

Assuming the 90 days horizon JD Sports Fashion is expected to generate 1.45 times more return on investment than Contagious Gaming. However, JD Sports is 1.45 times more volatile than Contagious Gaming. It trades about -0.01 of its potential returns per unit of risk. Contagious Gaming is currently generating about -0.04 per unit of risk. If you would invest  167.00  in JD Sports Fashion on October 5, 2024 and sell it today you would lose (50.00) from holding JD Sports Fashion or give up 29.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.36%
Values	Daily Returns

JD Sports Fashion  vs.  Contagious Gaming

JD Sports Fashion

Risk-Adjusted Performance

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Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Contagious Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contagious Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Contagious Gaming is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JD Sports and Contagious Gaming

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

The idea behind JD Sports Fashion and Contagious Gaming 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.