Correlation Between JD Sports and SBM Offshore

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

Diversification Opportunities for JD Sports and SBM Offshore

-0.02

Correlation Coefficient

JD Sports  SBM Offshore

Good diversification

The 3 months correlation between JDSPY and SBM is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV 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 SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of JD Sports i.e., JD Sports and SBM Offshore go up and down completely randomly.

Pair Corralation between JD Sports and SBM Offshore

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the SBM Offshore. In addition to that, JD Sports is 1.92 times more volatile than SBM Offshore NV. It trades about -0.16 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about -0.01 per unit of volatility. If you would invest  1,801  in SBM Offshore NV on September 17, 2024 and sell it today you would lose (41.00) from holding SBM Offshore NV or give up 2.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

JD Sports Fashion  vs.  SBM Offshore NV

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. 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JD Sports and SBM Offshore

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

The idea behind JD Sports Fashion and SBM Offshore NV 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.