Correlation Between BAKER and JD Sports

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

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

Diversification Opportunities for BAKER and JD Sports

0.05

Correlation Coefficient

BAKER  JD Sports

Significant diversification

The 3 months correlation between BAKER and JDDSF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BAKER HUGHES A 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 BAKER 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 BAKER HUGHES A 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 BAKER i.e., BAKER and JD Sports go up and down completely randomly.

Pair Corralation between BAKER and JD Sports

Assuming the 90 days trading horizon BAKER HUGHES A is expected to generate 0.16 times more return on investment than JD Sports. However, BAKER HUGHES A is 6.43 times less risky than JD Sports. It trades about -0.17 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.15 per unit of risk. If you would invest  9,641  in BAKER HUGHES A on October 7, 2024 and sell it today you would lose (290.00) from holding BAKER HUGHES A or give up 3.01% of portfolio value over 90 days.

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

BAKER HUGHES A  vs.  JD Sports Fashion

BAKER HUGHES A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAKER HUGHES A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAKER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BAKER and JD Sports

The main advantage of trading using opposite BAKER and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAKER 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 BAKER HUGHES A 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.