Correlation Between JD Sports and Stagwell

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

Diversification Opportunities for JD Sports and Stagwell

-0.49

Correlation Coefficient

JD Sports  Stagwell

Very good diversification

The 3 months correlation between JDSPY and Stagwell is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of JD Sports i.e., JD Sports and Stagwell go up and down completely randomly.

Pair Corralation between JD Sports and Stagwell

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Stagwell. In addition to that, JD Sports is 1.67 times more volatile than Stagwell. It trades about -0.16 of its total potential returns per unit of risk. Stagwell is currently generating about -0.02 per unit of volatility. If you would invest  732.00  in Stagwell on September 19, 2024 and sell it today you would lose (38.00) from holding Stagwell or give up 5.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

JD Sports Fashion  vs.  Stagwell

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with JD Sports and Stagwell

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

The idea behind JD Sports Fashion and Stagwell 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.