Correlation Between Information Technology and JSL Construction

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

By analyzing existing cross correlation between Information Technology Total and JSL Construction Development, you can compare the effects of market volatilities on Information Technology and JSL Construction 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 Information Technology with a short position of JSL Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and JSL Construction.

Diversification Opportunities for Information Technology and JSL Construction

-0.63

Correlation Coefficient

Information Technology  JSL Construction

Excellent diversification

The 3 months correlation between Information and JSL is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and JSL Construction Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSL Construction Dev and Information Technology 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 Information Technology Total are associated (or correlated) with JSL Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSL Construction Dev has no effect on the direction of Information Technology i.e., Information Technology and JSL Construction go up and down completely randomly.

Pair Corralation between Information Technology and JSL Construction

Assuming the 90 days trading horizon Information Technology Total is expected to under-perform the JSL Construction. But the stock apears to be less risky and, when comparing its historical volatility, Information Technology Total is 1.53 times less risky than JSL Construction. The stock trades about -0.07 of its potential returns per unit of risk. The JSL Construction Development is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,740  in JSL Construction Development on October 6, 2024 and sell it today you would earn a total of  250.00  from holding JSL Construction Development or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Information Technology Total  vs.  JSL Construction Development

Information Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Information Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JSL Construction Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSL Construction Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Information Technology and JSL Construction

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

The idea behind Information Technology Total and JSL Construction Development 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.