Correlation Between JD Sports and Olympic Steel

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

Diversification Opportunities for JD Sports and Olympic Steel

-0.61

Correlation Coefficient

JD Sports  Olympic Steel

Excellent diversification

The 3 months correlation between JDSPY and Olympic is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of JD Sports i.e., JD Sports and Olympic Steel go up and down completely randomly.

Pair Corralation between JD Sports and Olympic Steel

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Olympic Steel. In addition to that, JD Sports is 2.37 times more volatile than Olympic Steel. It trades about -0.02 of its total potential returns per unit of risk. Olympic Steel is currently generating about 0.02 per unit of volatility. If you would invest  3,950  in Olympic Steel on September 16, 2024 and sell it today you would earn a total of  17.00  from holding Olympic Steel or generate 0.43% 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.  Olympic Steel

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.

Olympic Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Olympic Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Olympic Steel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JD Sports and Olympic Steel

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

The idea behind JD Sports Fashion and Olympic Steel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.