Correlation Between Aterian and JD Sports

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

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

Diversification Opportunities for Aterian and JD Sports

0.73

Correlation Coefficient

Aterian  JD Sports

Poor diversification

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

Pair Corralation between Aterian and JD Sports

Given the investment horizon of 90 days Aterian is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, Aterian is 1.17 times less risky than JD Sports. The stock trades about -0.27 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  123.00  in JD Sports Fashion on September 28, 2024 and sell it today you would earn a total of  2.00  from holding JD Sports Fashion or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Aterian  vs.  JD Sports Fashion

Aterian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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. 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 Aterian and JD Sports

The main advantage of trading using opposite Aterian and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aterian 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 Aterian 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.