Correlation Between J Steel and Mobase Electronics

Can any of the company-specific risk be diversified away by investing in both J Steel and Mobase Electronics 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 J Steel and Mobase Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between J Steel Co and Mobase Electronics CoLtd, you can compare the effects of market volatilities on J Steel and Mobase Electronics 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 J Steel with a short position of Mobase Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Steel and Mobase Electronics.

Diversification Opportunities for J Steel and Mobase Electronics

0.27

Correlation Coefficient

J Steel  Mobase Electronics

Modest diversification

The 3 months correlation between 023440 and Mobase is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding J Steel Co and Mobase Electronics CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobase Electronics CoLtd and J Steel 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 J Steel Co are associated (or correlated) with Mobase Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobase Electronics CoLtd has no effect on the direction of J Steel i.e., J Steel and Mobase Electronics go up and down completely randomly.

Pair Corralation between J Steel and Mobase Electronics

Assuming the 90 days trading horizon J Steel Co is expected to generate 2.23 times more return on investment than Mobase Electronics. However, J Steel is 2.23 times more volatile than Mobase Electronics CoLtd. It trades about -0.01 of its potential returns per unit of risk. Mobase Electronics CoLtd is currently generating about -0.15 per unit of risk. If you would invest  169,900  in J Steel Co on October 25, 2024 and sell it today you would lose (15,600) from holding J Steel Co or give up 9.18% of portfolio value over 90 days.

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

J Steel Co  vs.  Mobase Electronics CoLtd

J Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mobase Electronics CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobase Electronics CoLtd 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.

Pair Trading with J Steel and Mobase Electronics

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

The idea behind J Steel Co and Mobase Electronics CoLtd 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.