Correlation Between CDSPI Canadian and JFT Strategies

Can any of the company-specific risk be diversified away by investing in both CDSPI Canadian and JFT Strategies 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 CDSPI Canadian and JFT Strategies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CDSPI Canadian Equity and JFT Strategies, you can compare the effects of market volatilities on CDSPI Canadian and JFT Strategies 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 CDSPI Canadian with a short position of JFT Strategies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDSPI Canadian and JFT Strategies.

Diversification Opportunities for CDSPI Canadian and JFT Strategies

-0.28

Correlation Coefficient

CDSPI Canadian  JFT Strategies

Very good diversification

The 3 months correlation between CDSPI and JFT is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CDSPI Canadian Equity and JFT Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JFT Strategies and CDSPI Canadian 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 CDSPI Canadian Equity are associated (or correlated) with JFT Strategies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JFT Strategies has no effect on the direction of CDSPI Canadian i.e., CDSPI Canadian and JFT Strategies go up and down completely randomly.

Pair Corralation between CDSPI Canadian and JFT Strategies

Assuming the 90 days trading horizon CDSPI Canadian Equity is expected to under-perform the JFT Strategies. But the fund apears to be less risky and, when comparing its historical volatility, CDSPI Canadian Equity is 1.49 times less risky than JFT Strategies. The fund trades about -0.04 of its potential returns per unit of risk. The JFT Strategies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,493  in JFT Strategies on December 23, 2024 and sell it today you would lose (19.00) from holding JFT Strategies or give up 0.76% of portfolio value over 90 days.

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

CDSPI Canadian Equity  vs.  JFT Strategies

CDSPI Canadian Equity

Risk-Adjusted Performance

Very Weak

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

JFT Strategies

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CDSPI Canadian and JFT Strategies

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

The idea behind CDSPI Canadian Equity and JFT Strategies 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 CEOs Directory module to screen CEOs from public companies around the world.