Correlation Between XBP Europe and JD Sports

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

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

Diversification Opportunities for XBP Europe and JD Sports

-0.12

Correlation Coefficient

XBP Europe  JD Sports

Good diversification

The 3 months correlation between XBP and JDSPY is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding XBP Europe Holdings 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 XBP Europe 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 XBP Europe Holdings 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 XBP Europe i.e., XBP Europe and JD Sports go up and down completely randomly.

Pair Corralation between XBP Europe and JD Sports

Considering the 90-day investment horizon XBP Europe Holdings is expected to generate 1.19 times more return on investment than JD Sports. However, XBP Europe is 1.19 times more volatile than JD Sports Fashion. It trades about -0.01 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.19 per unit of risk. If you would invest  114.00  in XBP Europe Holdings on September 30, 2024 and sell it today you would lose (3.00) from holding XBP Europe Holdings or give up 2.63% of portfolio value over 90 days.

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

XBP Europe Holdings  vs.  JD Sports Fashion

XBP Europe Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XBP Europe Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, XBP Europe reported solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with XBP Europe and JD Sports

The main advantage of trading using opposite XBP Europe and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XBP Europe 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 XBP Europe Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.