Correlation Between Auto Trader and Jupiter Fund

Can any of the company-specific risk be diversified away by investing in both Auto Trader and Jupiter Fund 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 Auto Trader and Jupiter Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Auto Trader Group and Jupiter Fund Management, you can compare the effects of market volatilities on Auto Trader and Jupiter Fund 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 Auto Trader with a short position of Jupiter Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Jupiter Fund.

Diversification Opportunities for Auto Trader and Jupiter Fund

0.61

Correlation Coefficient

Auto Trader  Jupiter Fund

Poor diversification

The 3 months correlation between Auto and Jupiter is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Jupiter Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jupiter Fund Management and Auto Trader 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 Auto Trader Group are associated (or correlated) with Jupiter Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jupiter Fund Management has no effect on the direction of Auto Trader i.e., Auto Trader and Jupiter Fund go up and down completely randomly.

Pair Corralation between Auto Trader and Jupiter Fund

Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Jupiter Fund. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.11 times less risky than Jupiter Fund. The stock trades about -0.05 of its potential returns per unit of risk. The Jupiter Fund Management is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,590  in Jupiter Fund Management on September 2, 2024 and sell it today you would lose (240.00) from holding Jupiter Fund Management or give up 2.79% of portfolio value over 90 days.

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

Auto Trader Group  vs.  Jupiter Fund Management

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Auto Trader is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Jupiter Fund Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jupiter Fund Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jupiter Fund is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Auto Trader and Jupiter Fund

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

The idea behind Auto Trader Group and Jupiter Fund Management 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.