Correlation Between JD Sports and Life Time

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

Diversification Opportunities for JD Sports and Life Time

-0.09

Correlation Coefficient

JD Sports  Life Time

Good diversification

The 3 months correlation between JDDSF and Life is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group 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 Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of JD Sports i.e., JD Sports and Life Time go up and down completely randomly.

Pair Corralation between JD Sports and Life Time

Assuming the 90 days horizon JD Sports is expected to generate 1.25 times less return on investment than Life Time. In addition to that, JD Sports is 1.64 times more volatile than Life Time Group. It trades about 0.03 of its total potential returns per unit of risk. Life Time Group is currently generating about 0.06 per unit of volatility. If you would invest  1,185  in Life Time Group on September 15, 2024 and sell it today you would earn a total of  1,090  from holding Life Time Group or generate 91.98% return on investment over 90 days.

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

JD Sports Fashion  vs.  Life Time Group

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Life Time Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Time Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with JD Sports and Life Time

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

The idea behind JD Sports Fashion and Life Time Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.