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 FASH, 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

-0.39

Correlation Coefficient

DICKS Sporting  JD SPORTS

Very good diversification

The 3 months correlation between DICKS and 9JD is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and JD SPORTS FASH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD SPORTS FASH 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 FASH 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

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 0.74 times more return on investment than JD SPORTS. However, DICKS Sporting Goods is 1.35 times less risky than JD SPORTS. It trades about 0.14 of its potential returns per unit of risk. JD SPORTS FASH is currently generating about -0.14 per unit of risk. If you would invest  18,742  in DICKS Sporting Goods on September 12, 2024 and sell it today you would earn a total of  1,613  from holding DICKS Sporting Goods or generate 8.61% return on investment over 90 days.

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

DICKS Sporting Goods  vs.  JD SPORTS FASH

DICKS Sporting Goods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 fragile 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.

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's long position.

The idea behind DICKS Sporting Goods and JD SPORTS FASH 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.