Correlation Between LAKE MATERIALS and Jahwa Electron

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

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

Diversification Opportunities for LAKE MATERIALS and Jahwa Electron

0.95

Correlation Coefficient

LAKE MATERIALS  Jahwa Electron

Almost no diversification

The 3 months correlation between LAKE and Jahwa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and Jahwa Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jahwa Electron and LAKE MATERIALS 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 LAKE MATERIALS LTD 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 LAKE MATERIALS i.e., LAKE MATERIALS and Jahwa Electron go up and down completely randomly.

Pair Corralation between LAKE MATERIALS and Jahwa Electron

Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to generate 1.34 times more return on investment than Jahwa Electron. However, LAKE MATERIALS is 1.34 times more volatile than Jahwa Electron. It trades about 0.09 of its potential returns per unit of risk. Jahwa Electron is currently generating about -0.12 per unit of risk. If you would invest  1,187,000  in LAKE MATERIALS LTD on October 22, 2024 and sell it today you would earn a total of  43,000  from holding LAKE MATERIALS LTD or generate 3.62% return on investment over 90 days.

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

LAKE MATERIALS LTD  vs.  Jahwa Electron

LAKE MATERIALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAKE MATERIALS LTD 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.

Jahwa Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jahwa Electron 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 LAKE MATERIALS and Jahwa Electron

The main advantage of trading using opposite LAKE MATERIALS and Jahwa Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAKE MATERIALS 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 LAKE MATERIALS LTD 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.