Correlation Between Valhi and JD Sports

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

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

Diversification Opportunities for Valhi and JD Sports

0.73

Correlation Coefficient

Valhi  JD Sports

Poor diversification

The 3 months correlation between Valhi and JDSPY is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc 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 Valhi 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 Valhi Inc 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 Valhi i.e., Valhi and JD Sports go up and down completely randomly.

Pair Corralation between Valhi and JD Sports

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, Valhi Inc is 1.29 times less risky than JD Sports. The stock trades about -0.08 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.05 of returns per unit of risk over similar time horizon. 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

Valhi Inc  vs.  JD Sports Fashion

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.

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.

Pair Trading with Valhi and JD Sports

The main advantage of trading using opposite Valhi and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi 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 Valhi Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.