Correlation Between JD Sports and Alto Ingredients

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

Diversification Opportunities for JD Sports and Alto Ingredients

0.72

Correlation Coefficient

JD Sports  Alto Ingredients

Poor diversification

The 3 months correlation between JDDSF and Alto is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients 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 Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of JD Sports i.e., JD Sports and Alto Ingredients go up and down completely randomly.

Pair Corralation between JD Sports and Alto Ingredients

Assuming the 90 days horizon JD Sports is expected to generate 1.48 times less return on investment than Alto Ingredients. But when comparing it to its historical volatility, JD Sports Fashion is 1.11 times less risky than Alto Ingredients. It trades about 0.1 of its potential returns per unit of risk. Alto Ingredients is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Alto Ingredients on May 13, 2025 and sell it today you would earn a total of  24.00  from holding Alto Ingredients or generate 29.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

JD Sports Fashion  vs.  Alto Ingredients

JD Sports Fashion

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in JD Sports Fashion are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, JD Sports reported solid returns over the last few months and may actually be approaching a breakup point.

Alto Ingredients

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alto Ingredients displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD Sports and Alto Ingredients

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

The idea behind JD Sports Fashion and Alto Ingredients 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.