Correlation Between Edgewise Therapeutics and JD Sports

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

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

Diversification Opportunities for Edgewise Therapeutics and JD Sports

0.43

Correlation Coefficient

Edgewise Therapeutics  JD Sports

Very weak diversification

The 3 months correlation between Edgewise and JDDSF is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics 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 Edgewise Therapeutics 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 Edgewise Therapeutics 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 Edgewise Therapeutics i.e., Edgewise Therapeutics and JD Sports go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and JD Sports

Given the investment horizon of 90 days Edgewise Therapeutics is expected to generate 2.82 times more return on investment than JD Sports. However, Edgewise Therapeutics is 2.82 times more volatile than JD Sports Fashion. It trades about 0.15 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  1,793  in Edgewise Therapeutics on September 4, 2024 and sell it today you would earn a total of  1,361  from holding Edgewise Therapeutics or generate 75.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Edgewise Therapeutics  vs.  JD Sports Fashion

Edgewise Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Edgewise Therapeutics showed 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. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Edgewise Therapeutics and JD Sports

The main advantage of trading using opposite Edgewise Therapeutics and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewise Therapeutics 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 Edgewise Therapeutics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.