Correlation Between JD Sports and Sea

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

Diversification Opportunities for JD Sports and Sea

-0.81

Correlation Coefficient

JD Sports  Sea

Pay attention - limited upside

The 3 months correlation between JDSPY and Sea is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of JD Sports i.e., JD Sports and Sea go up and down completely randomly.

Pair Corralation between JD Sports and Sea

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Sea. In addition to that, JD Sports is 2.32 times more volatile than Sea. It trades about -0.17 of its total potential returns per unit of risk. Sea is currently generating about -0.21 per unit of volatility. If you would invest  11,415  in Sea on October 8, 2024 and sell it today you would lose (783.00) from holding Sea or give up 6.86% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  Sea

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

Sea

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Sea

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

The idea behind JD Sports Fashion and Sea 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.