Correlation Between JD Sports and Catena Media
Can any of the company-specific risk be diversified away by investing in both JD Sports and Catena Media 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 Catena Media 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 Catena Media PLC, you can compare the effects of market volatilities on JD Sports and Catena Media 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 Catena Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Catena Media.
Diversification Opportunities for JD Sports and Catena Media
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between JD Sports and Catena is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Catena Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catena Media PLC 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 Catena Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catena Media PLC has no effect on the direction of JD Sports i.e., JD Sports and Catena Media go up and down completely randomly.
Pair Corralation between JD Sports and Catena Media
Assuming the 90 days trading horizon JD Sports Fashion is expected to generate 0.67 times more return on investment than Catena Media. However, JD Sports Fashion is 1.5 times less risky than Catena Media. It trades about -0.01 of its potential returns per unit of risk. Catena Media PLC is currently generating about -0.12 per unit of risk. If you would invest 11,781 in JD Sports Fashion on September 9, 2024 and sell it today you would lose (1,316) from holding JD Sports Fashion or give up 11.17% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
JD Sports Fashion vs. Catena Media PLC
Performance |
Timeline |
JD Sports Fashion |
Catena Media PLC |
JD Sports and Catena Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with JD Sports and Catena Media
The main advantage of trading using opposite JD Sports and Catena Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports position performs unexpectedly, Catena Media 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 Catena Media will offset losses from the drop in Catena Media's long position.JD Sports vs. Hansa Investment | JD Sports vs. Empire Metals Limited | JD Sports vs. Coeur Mining | JD Sports vs. Wheaton Precious Metals |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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