Correlation Between Emerson Radio and JD Sports

Can any of the company-specific risk be diversified away by investing in both Emerson Radio and JD Sports 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 Emerson Radio and JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerson Radio and JD Sports Fashion, you can compare the effects of market volatilities on Emerson Radio and JD Sports 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 Emerson Radio with a short position of JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and JD Sports.

Diversification Opportunities for Emerson Radio and JD Sports

0.64

Correlation Coefficient

Emerson Radio  JD Sports

Poor diversification

The 3 months correlation between Emerson and JDSPY is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion and Emerson Radio 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 Emerson Radio are associated (or correlated) with JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Emerson Radio i.e., Emerson Radio and JD Sports go up and down completely randomly.

Pair Corralation between Emerson Radio and JD Sports

Considering the 90-day investment horizon Emerson Radio is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, Emerson Radio is 1.85 times less risky than JD Sports. The stock trades about -0.23 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  147.00  in JD Sports Fashion on September 12, 2024 and sell it today you would lose (17.00) from holding JD Sports Fashion or give up 11.56% of portfolio value over 90 days.

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

Emerson Radio  vs.  JD Sports Fashion

Emerson Radio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerson Radio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Emerson Radio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Emerson Radio and JD Sports

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

The idea behind Emerson Radio and JD Sports Fashion 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.