Correlation Between Sovereign Metals and JD Sports

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

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

Diversification Opportunities for Sovereign Metals and JD Sports

-0.34

Correlation Coefficient

Sovereign Metals  JD Sports

Very good diversification

The 3 months correlation between Sovereign and JD Sports is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals i.e., Sovereign Metals and JD Sports go up and down completely randomly.

Pair Corralation between Sovereign Metals and JD Sports

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 3.32 times less return on investment than JD Sports. But when comparing it to its historical volatility, Sovereign Metals is 1.37 times less risky than JD Sports. It trades about 0.03 of its potential returns per unit of risk. JD Sports Fashion is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,660  in JD Sports Fashion on April 21, 2025 and sell it today you would earn a total of  880.00  from holding JD Sports Fashion or generate 11.49% return on investment over 90 days.

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

Sovereign Metals  vs.  JD Sports Fashion

Sovereign Metals

Risk-Adjusted Performance

Weak

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

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 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, JD Sports exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sovereign Metals and JD Sports

The main advantage of trading using opposite Sovereign Metals and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovereign Metals 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 Sovereign Metals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.