Correlation Between JD Sports and Sonos

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

Diversification Opportunities for JD Sports and Sonos

-0.62

Correlation Coefficient

JD Sports  Sonos

Excellent diversification

The 3 months correlation between JDSPY and Sonos is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos 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 Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of JD Sports i.e., JD Sports and Sonos go up and down completely randomly.

Pair Corralation between JD Sports and Sonos

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Sonos. In addition to that, JD Sports is 1.69 times more volatile than Sonos Inc. It trades about -0.07 of its total potential returns per unit of risk. Sonos Inc is currently generating about 0.1 per unit of volatility. If you would invest  1,180  in Sonos Inc on September 2, 2024 and sell it today you would earn a total of  181.00  from holding Sonos Inc or generate 15.34% return on investment over 90 days.

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

JD Sports Fashion  vs.  Sonos 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. In spite of weak 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.

Sonos Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Sonos

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

The idea behind JD Sports Fashion and Sonos 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.