Correlation Between JD Sports and Old Dominion

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

Diversification Opportunities for JD Sports and Old Dominion

0.02

Correlation Coefficient

JD Sports  Old Dominion

Significant diversification

The 3 months correlation between JDDSF and Old is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of JD Sports i.e., JD Sports and Old Dominion go up and down completely randomly.

Pair Corralation between JD Sports and Old Dominion

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Old Dominion. In addition to that, JD Sports is 1.26 times more volatile than Old Dominion Freight. It trades about -0.21 of its total potential returns per unit of risk. Old Dominion Freight is currently generating about 0.07 per unit of volatility. If you would invest  20,375  in Old Dominion Freight on September 5, 2024 and sell it today you would earn a total of  728.00  from holding Old Dominion Freight or generate 3.57% return on investment over 90 days.

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

JD Sports Fashion  vs.  Old Dominion Freight

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.

Old Dominion Freight

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Old Dominion disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Old Dominion

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

The idea behind JD Sports Fashion and Old Dominion Freight 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.