Correlation Between Primo Brands and JD Sports

Can any of the company-specific risk be diversified away by investing in both Primo Brands and JD Sports 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 Primo Brands and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Primo Brands and JD Sports Fashion, you can compare the effects of market volatilities on Primo Brands and JD Sports 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 Primo Brands with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primo Brands and JD Sports.

Diversification Opportunities for Primo Brands and JD Sports

-0.86

Correlation Coefficient

Primo Brands  JD Sports

Pay attention - limited upside

The 3 months correlation between Primo and JDSPY is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion and Primo Brands 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 Primo Brands are associated (or correlated) with JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Primo Brands i.e., Primo Brands and JD Sports go up and down completely randomly.

Pair Corralation between Primo Brands and JD Sports

Given the investment horizon of 90 days Primo Brands is expected to generate 0.53 times more return on investment than JD Sports. However, Primo Brands is 1.89 times less risky than JD Sports. It trades about 0.19 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.19 per unit of risk. If you would invest  2,453  in Primo Brands on September 21, 2024 and sell it today you would earn a total of  652.50  from holding Primo Brands or generate 26.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Primo Brands  vs.  JD Sports Fashion

Primo Brands

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Primo Brands and JD Sports

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

The idea behind Primo Brands and JD Sports Fashion 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.