Correlation Between Jb Financial and J Steel

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

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

Diversification Opportunities for Jb Financial and J Steel

0.87

Correlation Coefficient

Jb Financial  J Steel

Very poor diversification

The 3 months correlation between 175330 and 023440 is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Jb Financial and J Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Steel and Jb Financial 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 Jb Financial are associated (or correlated) with J Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Steel has no effect on the direction of Jb Financial i.e., Jb Financial and J Steel go up and down completely randomly.

Pair Corralation between Jb Financial and J Steel

Assuming the 90 days trading horizon Jb Financial is expected to generate 1.14 times less return on investment than J Steel. But when comparing it to its historical volatility, Jb Financial is 1.88 times less risky than J Steel. It trades about 0.25 of its potential returns per unit of risk. J Steel Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  128,000  in J Steel Co on September 3, 2024 and sell it today you would earn a total of  51,000  from holding J Steel Co or generate 39.84% return on investment over 90 days.

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

Jb Financial  vs.  J Steel Co

Jb Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jb Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jb Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

J Steel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in J Steel Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, J Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jb Financial and J Steel

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

The idea behind Jb Financial and J Steel Co 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.