Correlation Between JD SPORTS and Big 5

Can any of the company-specific risk be diversified away by investing in both JD SPORTS and Big 5 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 JD SPORTS and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JD SPORTS FASH and Big 5 Sporting, you can compare the effects of market volatilities on JD SPORTS and Big 5 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 JD SPORTS with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD SPORTS and Big 5.

Diversification Opportunities for JD SPORTS and Big 5

0.59

Correlation Coefficient

JD SPORTS  Big 5

Very weak diversification

The 3 months correlation between 9JD and Big is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding JD SPORTS FASH and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and JD SPORTS 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 JD SPORTS FASH are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of JD SPORTS i.e., JD SPORTS and Big 5 go up and down completely randomly.

Pair Corralation between JD SPORTS and Big 5

Assuming the 90 days horizon JD SPORTS FASH is expected to under-perform the Big 5. In addition to that, JD SPORTS is 1.26 times more volatile than Big 5 Sporting. It trades about -0.16 of its total potential returns per unit of risk. Big 5 Sporting is currently generating about 0.07 per unit of volatility. If you would invest  152.00  in Big 5 Sporting on September 4, 2024 and sell it today you would earn a total of  6.00  from holding Big 5 Sporting or generate 3.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

JD SPORTS FASH  vs.  Big 5 Sporting

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Big 5 Sporting

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JD SPORTS and Big 5

The main advantage of trading using opposite JD SPORTS and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD SPORTS position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind JD SPORTS FASH and Big 5 Sporting 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.