Correlation Between NORFOLK and JD Sports

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

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

Diversification Opportunities for NORFOLK and JD Sports

0.6

Correlation Coefficient

NORFOLK  JD Sports

Poor diversification

The 3 months correlation between NORFOLK and JDDSF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P 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 NORFOLK 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 NORFOLK SOUTHN P 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 NORFOLK i.e., NORFOLK and JD Sports go up and down completely randomly.

Pair Corralation between NORFOLK and JD Sports

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to under-perform the JD Sports. But the bond apears to be less risky and, when comparing its historical volatility, NORFOLK SOUTHN P is 2.17 times less risky than JD Sports. The bond trades about -0.14 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  159.00  in JD Sports Fashion on October 8, 2024 and sell it today you would lose (13.00) from holding JD Sports Fashion or give up 8.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.32%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  JD Sports Fashion

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NORFOLK SOUTHN P 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NORFOLK and JD Sports

The main advantage of trading using opposite NORFOLK and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORFOLK 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 NORFOLK SOUTHN P 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..