Correlation Between JD Sports and Edgewise Therapeutics

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

Diversification Opportunities for JD Sports and Edgewise Therapeutics

0.43

Correlation Coefficient

JD Sports  Edgewise Therapeutics

Very weak diversification

The 3 months correlation between JDDSF and Edgewise is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics 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 Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of JD Sports i.e., JD Sports and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between JD Sports and Edgewise Therapeutics

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Edgewise Therapeutics. But the pink sheet apears to be less risky and, when comparing its historical volatility, JD Sports Fashion is 2.82 times less risky than Edgewise Therapeutics. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Edgewise Therapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. 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

JD Sports Fashion  vs.  Edgewise Therapeutics

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.

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.

Pair Trading with JD Sports and Edgewise Therapeutics

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

The idea behind JD Sports Fashion and Edgewise Therapeutics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.