Correlation Between ACL Plastics and Jat Holdings

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

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

Diversification Opportunities for ACL Plastics and Jat Holdings

0.86

Correlation Coefficient

ACL Plastics  Jat Holdings

Very poor diversification

The 3 months correlation between ACL and Jat is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ACL Plastics PLC 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 ACL Plastics 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 ACL Plastics PLC 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 ACL Plastics i.e., ACL Plastics and Jat Holdings go up and down completely randomly.

Pair Corralation between ACL Plastics and Jat Holdings

Assuming the 90 days trading horizon ACL Plastics PLC is expected to generate 1.0 times more return on investment than Jat Holdings. However, ACL Plastics is 1.0 times more volatile than Jat Holdings PLC. It trades about 0.16 of its potential returns per unit of risk. Jat Holdings PLC is currently generating about 0.15 per unit of risk. If you would invest  51,500  in ACL Plastics PLC on December 4, 2024 and sell it today you would earn a total of  10,800  from holding ACL Plastics PLC or generate 20.97% return on investment over 90 days.

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

ACL Plastics PLC  vs.  Jat Holdings PLC

ACL Plastics PLC

Risk-Adjusted Performance

Good

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

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 11 (%) 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 ACL Plastics and Jat Holdings

The main advantage of trading using opposite ACL Plastics and Jat Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACL Plastics 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 ACL Plastics PLC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.