Correlation Between Williams Sonoma and JD Sports

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

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

Diversification Opportunities for Williams Sonoma and JD Sports

0.27

Correlation Coefficient

Williams Sonoma  JD Sports

Modest diversification

The 3 months correlation between Williams and JDSPY is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma 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 Williams Sonoma 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 Williams Sonoma 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 Williams Sonoma i.e., Williams Sonoma and JD Sports go up and down completely randomly.

Pair Corralation between Williams Sonoma and JD Sports

Considering the 90-day investment horizon Williams Sonoma is expected to generate 0.72 times more return on investment than JD Sports. However, Williams Sonoma is 1.38 times less risky than JD Sports. It trades about -0.07 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.1 per unit of risk. If you would invest  18,598  in Williams Sonoma on December 29, 2024 and sell it today you would lose (2,156) from holding Williams Sonoma or give up 11.59% of portfolio value over 90 days.

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

Williams Sonoma  vs.  JD Sports Fashion

Williams Sonoma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Williams Sonoma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Williams Sonoma and JD Sports

The main advantage of trading using opposite Williams Sonoma and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Williams Sonoma 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 Williams Sonoma 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.