Correlation Between Western Securities and Jointo Energy

Can any of the company-specific risk be diversified away by investing in both Western Securities and Jointo Energy 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 Western Securities and Jointo Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Securities Co and Jointo Energy Investment, you can compare the effects of market volatilities on Western Securities and Jointo Energy 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 Western Securities with a short position of Jointo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Securities and Jointo Energy.

Diversification Opportunities for Western Securities and Jointo Energy

0.23

Correlation Coefficient

Western Securities  Jointo Energy

Modest diversification

The 3 months correlation between Western and Jointo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Western Securities Co and Jointo Energy Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jointo Energy Investment and Western Securities 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 Western Securities Co are associated (or correlated) with Jointo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jointo Energy Investment has no effect on the direction of Western Securities i.e., Western Securities and Jointo Energy go up and down completely randomly.

Pair Corralation between Western Securities and Jointo Energy

Assuming the 90 days trading horizon Western Securities Co is expected to under-perform the Jointo Energy. But the stock apears to be less risky and, when comparing its historical volatility, Western Securities Co is 2.35 times less risky than Jointo Energy. The stock trades about -0.53 of its potential returns per unit of risk. The Jointo Energy Investment is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  556.00  in Jointo Energy Investment on October 8, 2024 and sell it today you would lose (42.00) from holding Jointo Energy Investment or give up 7.55% of portfolio value over 90 days.

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

Western Securities Co  vs.  Jointo Energy Investment

Western Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jointo Energy Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jointo Energy Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jointo Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Securities and Jointo Energy

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

The idea behind Western Securities Co and Jointo Energy Investment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.