Correlation Between JPM INDIAN and AUTO TRADER

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

By analyzing existing cross correlation between JPM INDIAN INVT and AUTO TRADER ADR, you can compare the effects of market volatilities on JPM INDIAN and AUTO TRADER 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 JPM INDIAN with a short position of AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM INDIAN and AUTO TRADER.

Diversification Opportunities for JPM INDIAN and AUTO TRADER

-0.31

Correlation Coefficient

JPM INDIAN  AUTO TRADER

Very good diversification

The 3 months correlation between JPM and AUTO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding JPM INDIAN INVT and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR and JPM INDIAN 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 JPM INDIAN INVT are associated (or correlated) with AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of JPM INDIAN i.e., JPM INDIAN and AUTO TRADER go up and down completely randomly.

Pair Corralation between JPM INDIAN and AUTO TRADER

Assuming the 90 days horizon JPM INDIAN INVT is expected to under-perform the AUTO TRADER. In addition to that, JPM INDIAN is 1.29 times more volatile than AUTO TRADER ADR. It trades about -0.09 of its total potential returns per unit of risk. AUTO TRADER ADR is currently generating about -0.08 per unit of volatility. If you would invest  233.00  in AUTO TRADER ADR on October 25, 2024 and sell it today you would lose (5.00) from holding AUTO TRADER ADR or give up 2.15% of portfolio value over 90 days.

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

JPM INDIAN INVT  vs.  AUTO TRADER ADR

JPM INDIAN INVT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JPM INDIAN INVT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, JPM INDIAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AUTO TRADER ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTO TRADER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with JPM INDIAN and AUTO TRADER

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

The idea behind JPM INDIAN INVT and AUTO TRADER ADR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..