Correlation Between Btsp II and JFL Living

Can any of the company-specific risk be diversified away by investing in both Btsp II and JFL Living 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 Btsp II and JFL Living into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Btsp II Fundo and JFL Living Fundo, you can compare the effects of market volatilities on Btsp II and JFL Living 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 Btsp II with a short position of JFL Living. Check out your portfolio center. Please also check ongoing floating volatility patterns of Btsp II and JFL Living.

Diversification Opportunities for Btsp II and JFL Living

0.75

Correlation Coefficient

Btsp II  JFL Living

Poor diversification

The 3 months correlation between Btsp and JFL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Btsp II Fundo and JFL Living Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JFL Living Fundo and Btsp II 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 Btsp II Fundo are associated (or correlated) with JFL Living. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JFL Living Fundo has no effect on the direction of Btsp II i.e., Btsp II and JFL Living go up and down completely randomly.

Pair Corralation between Btsp II and JFL Living

Assuming the 90 days trading horizon Btsp II is expected to generate 4.55 times less return on investment than JFL Living. But when comparing it to its historical volatility, Btsp II Fundo is 7.89 times less risky than JFL Living. It trades about 0.13 of its potential returns per unit of risk. JFL Living Fundo is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,851  in JFL Living Fundo on October 11, 2024 and sell it today you would earn a total of  399.00  from holding JFL Living Fundo or generate 5.82% return on investment over 90 days.

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

Btsp II Fundo  vs.  JFL Living Fundo

Btsp II Fundo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Btsp II Fundo are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Btsp II is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JFL Living Fundo

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JFL Living Fundo are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak essential indicators, JFL Living may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Btsp II and JFL Living

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

The idea behind Btsp II Fundo and JFL Living Fundo 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.