Correlation Between JD Sports and Chrysalis Investments

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

Diversification Opportunities for JD Sports and Chrysalis Investments

-0.67

Correlation Coefficient

JD Sports  Chrysalis Investments

Excellent diversification

The 3 months correlation between JD Sports and Chrysalis is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments 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 Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of JD Sports i.e., JD Sports and Chrysalis Investments go up and down completely randomly.

Pair Corralation between JD Sports and Chrysalis Investments

Assuming the 90 days trading horizon JD Sports Fashion is expected to under-perform the Chrysalis Investments. In addition to that, JD Sports is 1.93 times more volatile than Chrysalis Investments. It trades about -0.16 of its total potential returns per unit of risk. Chrysalis Investments is currently generating about 0.2 per unit of volatility. If you would invest  8,100  in Chrysalis Investments on September 12, 2024 and sell it today you would earn a total of  1,720  from holding Chrysalis Investments or generate 21.23% return on investment over 90 days.

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

JD Sports Fashion  vs.  Chrysalis Investments

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.

Chrysalis Investments

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chrysalis Investments are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Chrysalis Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Chrysalis Investments

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

The idea behind JD Sports Fashion and Chrysalis Investments 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.