Correlation Between JD Sports and SALESFORCECOM

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

Diversification Opportunities for JD Sports and SALESFORCECOM

-0.68

Correlation Coefficient

JD Sports  SALESFORCECOM

Excellent diversification

The 3 months correlation between JDSPY and SALESFORCECOM is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and SALESFORCECOM INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALESFORCECOM 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 SALESFORCECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALESFORCECOM INC has no effect on the direction of JD Sports i.e., JD Sports and SALESFORCECOM go up and down completely randomly.

Pair Corralation between JD Sports and SALESFORCECOM

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the SALESFORCECOM. In addition to that, JD Sports is 3.18 times more volatile than SALESFORCECOM INC. It trades about -0.09 of its total potential returns per unit of risk. SALESFORCECOM INC is currently generating about 0.11 per unit of volatility. If you would invest  7,090  in SALESFORCECOM INC on December 26, 2024 and sell it today you would earn a total of  491.00  from holding SALESFORCECOM INC or generate 6.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

JD Sports Fashion  vs.  SALESFORCECOM INC

JD Sports Fashion

Risk-Adjusted Performance

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

SALESFORCECOM INC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCECOM INC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SALESFORCECOM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JD Sports and SALESFORCECOM

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

The idea behind JD Sports Fashion and SALESFORCECOM 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.