Correlation Between JD Sports and SM Investments

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

Diversification Opportunities for JD Sports and SM Investments

0.19

Correlation Coefficient

JD Sports  SM Investments

Average diversification

The 3 months correlation between JDSPY and SVTMF is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments 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 SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of JD Sports i.e., JD Sports and SM Investments go up and down completely randomly.

Pair Corralation between JD Sports and SM Investments

Assuming the 90 days horizon JD Sports Fashion is expected to generate 119.65 times more return on investment than SM Investments. However, JD Sports is 119.65 times more volatile than SM Investments. It trades about 0.07 of its potential returns per unit of risk. SM Investments is currently generating about 0.13 per unit of risk. If you would invest  100.00  in JD Sports Fashion on May 3, 2025 and sell it today you would earn a total of  12.00  from holding JD Sports Fashion or generate 12.0% return on investment over 90 days.

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

JD Sports Fashion  vs.  SM Investments

JD Sports Fashion

Risk-Adjusted Performance

Insignificant

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 fairly uncertain basic indicators, JD Sports showed solid returns over the last few months and may actually be approaching a breakup point.

SM Investments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SM Investments is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JD Sports and SM Investments

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

The idea behind JD Sports Fashion and SM Investments 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.