Correlation Between JD Sports and Valhi

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

Diversification Opportunities for JD Sports and Valhi

0.73

Correlation Coefficient

JD Sports  Valhi

Poor diversification

The 3 months correlation between JDSPY and Valhi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi 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 Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of JD Sports i.e., JD Sports and Valhi go up and down completely randomly.

Pair Corralation between JD Sports and Valhi

Assuming the 90 days horizon JD Sports Fashion is expected to generate 1.29 times more return on investment than Valhi. However, JD Sports is 1.29 times more volatile than Valhi Inc. It trades about -0.05 of its potential returns per unit of risk. Valhi Inc is currently generating about -0.08 per unit of risk. If you would invest  115.00  in JD Sports Fashion on December 20, 2024 and sell it today you would lose (16.00) from holding JD Sports Fashion or give up 13.91% of portfolio value over 90 days.

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

JD Sports Fashion  vs.  Valhi 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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Valhi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with JD Sports and Valhi

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

The idea behind JD Sports Fashion and Valhi 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.