Correlation Between JD Sports and Universal Health

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

Diversification Opportunities for JD Sports and Universal Health

0.51

Correlation Coefficient

JD Sports  Universal Health

Very weak diversification

The 3 months correlation between JD Sports and Universal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of JD Sports i.e., JD Sports and Universal Health go up and down completely randomly.

Pair Corralation between JD Sports and Universal Health

Assuming the 90 days trading horizon JD Sports Fashion is expected to generate 1.18 times more return on investment than Universal Health. However, JD Sports is 1.18 times more volatile than Universal Health Services. It trades about 0.07 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.04 per unit of risk. If you would invest  7,816  in JD Sports Fashion on April 24, 2025 and sell it today you would earn a total of  764.00  from holding JD Sports Fashion or generate 9.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

JD Sports Fashion  vs.  Universal Health Services

JD Sports Fashion

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JD Sports Fashion are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JD Sports may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Universal Health Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Universal Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JD Sports and Universal Health

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

The idea behind JD Sports Fashion and Universal Health Services 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.