Correlation Between Road Environment and Jonjee Hi-tech

Can any of the company-specific risk be diversified away by investing in both Road Environment and Jonjee Hi-tech 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 Road Environment and Jonjee Hi-tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Road Environment Technology and Jonjee Hi tech Industrial, you can compare the effects of market volatilities on Road Environment and Jonjee Hi-tech 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 Road Environment with a short position of Jonjee Hi-tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Road Environment and Jonjee Hi-tech.

Diversification Opportunities for Road Environment and Jonjee Hi-tech

0.21

Correlation Coefficient

Road Environment  Jonjee Hi-tech

Modest diversification

The 3 months correlation between Road and Jonjee is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Road Environment Technology and Jonjee Hi tech Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jonjee Hi tech and Road Environment 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 Road Environment Technology are associated (or correlated) with Jonjee Hi-tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jonjee Hi tech has no effect on the direction of Road Environment i.e., Road Environment and Jonjee Hi-tech go up and down completely randomly.

Pair Corralation between Road Environment and Jonjee Hi-tech

Assuming the 90 days trading horizon Road Environment Technology is not expected to generate positive returns. Moreover, Road Environment is 1.56 times more volatile than Jonjee Hi tech Industrial. It trades away all of its potential returns to assume current level of volatility. Jonjee Hi tech Industrial is currently generating about -0.11 per unit of risk. If you would invest  1,294  in Road Environment Technology on December 25, 2024 and sell it today you would lose (21.00) from holding Road Environment Technology or give up 1.62% of portfolio value over 90 days.

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

Road Environment Technology  vs.  Jonjee Hi tech Industrial

Road Environment Tec

Risk-Adjusted Performance

Very Weak

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

Jonjee Hi tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jonjee Hi tech Industrial 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.

Pair Trading with Road Environment and Jonjee Hi-tech

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

The idea behind Road Environment Technology and Jonjee Hi tech Industrial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.