Correlation Between JD Sports and EVS Broadcast

Can any of the company-specific risk be diversified away by investing in both JD Sports and EVS Broadcast 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 EVS Broadcast 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 EVS Broadcast Equipment, you can compare the effects of market volatilities on JD Sports and EVS Broadcast 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 EVS Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and EVS Broadcast.

Diversification Opportunities for JD Sports and EVS Broadcast

0.25

Correlation Coefficient

JD Sports  EVS Broadcast

Modest diversification

The 3 months correlation between JD Sports and EVS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment 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 EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of JD Sports i.e., JD Sports and EVS Broadcast go up and down completely randomly.

Pair Corralation between JD Sports and EVS Broadcast

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the EVS Broadcast. In addition to that, JD Sports is 2.36 times more volatile than EVS Broadcast Equipment. It trades about -0.11 of its total potential returns per unit of risk. EVS Broadcast Equipment is currently generating about -0.05 per unit of volatility. If you would invest  2,953  in EVS Broadcast Equipment on September 4, 2024 and sell it today you would lose (133.00) from holding EVS Broadcast Equipment or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

JD Sports Fashion  vs.  EVS Broadcast Equipment

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 uncertain 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.

EVS Broadcast Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVS Broadcast Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EVS Broadcast is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JD Sports and EVS Broadcast

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

The idea behind JD Sports Fashion and EVS Broadcast Equipment 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.