Correlation Between Baker Steel and JLEN Environmental

Can any of the company-specific risk be diversified away by investing in both Baker Steel and JLEN Environmental 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 Baker Steel and JLEN Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Baker Steel Resources and JLEN Environmental Assets, you can compare the effects of market volatilities on Baker Steel and JLEN Environmental 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 Baker Steel with a short position of JLEN Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and JLEN Environmental.

Diversification Opportunities for Baker Steel and JLEN Environmental

-0.47

Correlation Coefficient

Baker Steel  JLEN Environmental

Very good diversification

The 3 months correlation between Baker and JLEN is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and JLEN Environmental Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JLEN Environmental Assets and Baker Steel 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 Baker Steel Resources are associated (or correlated) with JLEN Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JLEN Environmental Assets has no effect on the direction of Baker Steel i.e., Baker Steel and JLEN Environmental go up and down completely randomly.

Pair Corralation between Baker Steel and JLEN Environmental

Assuming the 90 days trading horizon Baker Steel Resources is expected to under-perform the JLEN Environmental. In addition to that, Baker Steel is 1.15 times more volatile than JLEN Environmental Assets. It trades about -0.02 of its total potential returns per unit of risk. JLEN Environmental Assets is currently generating about -0.01 per unit of volatility. If you would invest  7,190  in JLEN Environmental Assets on December 30, 2024 and sell it today you would lose (100.00) from holding JLEN Environmental Assets or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Baker Steel Resources  vs.  JLEN Environmental Assets

Baker Steel Resources

Risk-Adjusted Performance

Very Weak

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

JLEN Environmental Assets

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Baker Steel and JLEN Environmental

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

The idea behind Baker Steel Resources and JLEN Environmental Assets 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.