Correlation Between Microfriend and Jahwa Electron

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

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

Diversification Opportunities for Microfriend and Jahwa Electron

0.07

Correlation Coefficient

Microfriend  Jahwa Electron

Significant diversification

The 3 months correlation between Microfriend and Jahwa is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and Jahwa Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahwa Electron and Microfriend 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 Microfriend are associated (or correlated) with Jahwa Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jahwa Electron has no effect on the direction of Microfriend i.e., Microfriend and Jahwa Electron go up and down completely randomly.

Pair Corralation between Microfriend and Jahwa Electron

Assuming the 90 days trading horizon Microfriend is expected to generate 7.21 times less return on investment than Jahwa Electron. But when comparing it to its historical volatility, Microfriend is 1.12 times less risky than Jahwa Electron. It trades about 0.01 of its potential returns per unit of risk. Jahwa Electron is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,280,000  in Jahwa Electron on November 28, 2024 and sell it today you would earn a total of  124,000  from holding Jahwa Electron or generate 9.69% return on investment over 90 days.

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

Microfriend  vs.  Jahwa Electron

Microfriend

Risk-Adjusted Performance

Very Weak

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

Jahwa Electron

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jahwa Electron are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jahwa Electron sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microfriend and Jahwa Electron

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

The idea behind Microfriend and Jahwa Electron 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 Valuation module to check real value of public entities based on technical and fundamental data.