Correlation Between J Steel and Microfriend

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

Diversification Opportunities for J Steel and Microfriend

-0.17

Correlation Coefficient

J Steel  Microfriend

Good diversification

The 3 months correlation between 023440 and Microfriend is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding J Steel Co and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend 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 Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of J Steel i.e., J Steel and Microfriend go up and down completely randomly.

Pair Corralation between J Steel and Microfriend

Assuming the 90 days trading horizon J Steel Co is expected to under-perform the Microfriend. In addition to that, J Steel is 1.01 times more volatile than Microfriend. It trades about -0.13 of its total potential returns per unit of risk. Microfriend is currently generating about 0.22 per unit of volatility. If you would invest  273,000  in Microfriend on October 11, 2024 and sell it today you would earn a total of  33,000  from holding Microfriend or generate 12.09% return on investment over 90 days.

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

J Steel Co  vs.  Microfriend

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.

Microfriend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microfriend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with J Steel and Microfriend

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

The idea behind J Steel Co and Microfriend 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.