Correlation Between Dicks Sporting and JD Sports

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

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

Diversification Opportunities for Dicks Sporting and JD Sports

-0.54

Correlation Coefficient

Dicks Sporting  JD Sports

Excellent diversification

The 3 months correlation between Dicks and JDDSF is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods 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 Dicks Sporting 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 Dicks Sporting Goods 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 Dicks Sporting i.e., Dicks Sporting and JD Sports go up and down completely randomly.

Pair Corralation between Dicks Sporting and JD Sports

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 0.76 times more return on investment than JD Sports. However, Dicks Sporting Goods is 1.31 times less risky than JD Sports. It trades about 0.03 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.04 per unit of risk. If you would invest  21,420  in Dicks Sporting Goods on September 23, 2024 and sell it today you would earn a total of  456.00  from holding Dicks Sporting Goods or generate 2.13% return on investment over 90 days.

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

Dicks Sporting Goods  vs.  JD Sports Fashion

Dicks Sporting Goods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Dicks Sporting is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dicks Sporting and JD Sports

The main advantage of trading using opposite Dicks Sporting and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting 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 Dicks Sporting Goods 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.