Correlation Between JD Sports and Axon Enterprise

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

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

Diversification Opportunities for JD Sports and Axon Enterprise

-0.84

Correlation Coefficient

JD Sports  Axon Enterprise

Pay attention - limited upside

The 3 months correlation between JD Sports and Axon is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise 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 Fashion are associated (or correlated) with Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of JD Sports i.e., JD Sports and Axon Enterprise go up and down completely randomly.

Pair Corralation between JD Sports and Axon Enterprise

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Axon Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 1.24 times less risky than Axon Enterprise. The stock trades about -0.12 of its potential returns per unit of risk. The Axon Enterprise is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  36,341  in Axon Enterprise on September 2, 2024 and sell it today you would earn a total of  28,411  from holding Axon Enterprise or generate 78.18% return on investment over 90 days.

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

JD Sports Fashion  vs.  Axon Enterprise

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Axon Enterprise

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Axon Enterprise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Axon Enterprise

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

The idea behind JD Sports Fashion and Axon Enterprise 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.