Correlation Between Amana Bank and Jat Holdings

Can any of the company-specific risk be diversified away by investing in both Amana Bank and Jat Holdings 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 Amana Bank and Jat Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amana Bank and Jat Holdings PLC, you can compare the effects of market volatilities on Amana Bank and Jat Holdings 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 Amana Bank with a short position of Jat Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amana Bank and Jat Holdings.

Diversification Opportunities for Amana Bank and Jat Holdings

0.82

Correlation Coefficient

Amana Bank  Jat Holdings

Very poor diversification

The 3 months correlation between Amana and Jat is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amana Bank and Jat Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jat Holdings PLC and Amana Bank 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 Amana Bank are associated (or correlated) with Jat Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jat Holdings PLC has no effect on the direction of Amana Bank i.e., Amana Bank and Jat Holdings go up and down completely randomly.

Pair Corralation between Amana Bank and Jat Holdings

Assuming the 90 days trading horizon Amana Bank is expected to under-perform the Jat Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Amana Bank is 3.72 times less risky than Jat Holdings. The stock trades about -0.41 of its potential returns per unit of risk. The Jat Holdings PLC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,750  in Jat Holdings PLC on December 4, 2024 and sell it today you would lose (50.00) from holding Jat Holdings PLC or give up 1.82% of portfolio value over 90 days.

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

Amana Bank  vs.  Jat Holdings PLC

Amana Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Amana Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jat Holdings PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amana Bank and Jat Holdings

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

The idea behind Amana Bank and Jat Holdings PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.