Correlation Between JD Sports and Sphere Entertainment

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

Diversification Opportunities for JD Sports and Sphere Entertainment

0.85

Correlation Coefficient

JD Sports  Sphere Entertainment

Very poor diversification

The 3 months correlation between JDSPY and Sphere is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of JD Sports i.e., JD Sports and Sphere Entertainment go up and down completely randomly.

Pair Corralation between JD Sports and Sphere Entertainment

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Sphere Entertainment. In addition to that, JD Sports is 1.75 times more volatile than Sphere Entertainment Co. It trades about -0.12 of its total potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.01 per unit of volatility. If you would invest  4,380  in Sphere Entertainment Co on October 8, 2024 and sell it today you would lose (134.00) from holding Sphere Entertainment Co or give up 3.06% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with JD Sports and Sphere Entertainment

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

The idea behind JD Sports Fashion and Sphere Entertainment Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.