Correlation Between Sabre Insurance and JD Sports

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

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

Diversification Opportunities for Sabre Insurance and JD Sports

0.3

Correlation Coefficient

Sabre Insurance  JD Sports

Weak diversification

The 3 months correlation between Sabre and JD Sports is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group 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 Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and JD Sports go up and down completely randomly.

Pair Corralation between Sabre Insurance and JD Sports

Assuming the 90 days trading horizon Sabre Insurance Group is expected to generate 0.56 times more return on investment than JD Sports. However, Sabre Insurance Group is 1.79 times less risky than JD Sports. It trades about -0.01 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.02 per unit of risk. If you would invest  15,449  in Sabre Insurance Group on October 5, 2024 and sell it today you would lose (1,489) from holding Sabre Insurance Group or give up 9.64% of portfolio value over 90 days.

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

Sabre Insurance Group  vs.  JD Sports Fashion

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sabre Insurance and JD Sports

The main advantage of trading using opposite Sabre Insurance and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.