Correlation Between Central Garden and JBS SA

Can any of the company-specific risk be diversified away by investing in both Central Garden and JBS SA 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 Central Garden and JBS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Garden Pet and JBS SA, you can compare the effects of market volatilities on Central Garden and JBS SA 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 Central Garden with a short position of JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and JBS SA.

Diversification Opportunities for Central Garden and JBS SA

0.58

Correlation Coefficient

Central Garden  JBS SA

Very weak diversification

The 3 months correlation between Central and JBS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA and Central Garden 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 Central Garden Pet are associated (or correlated) with JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of Central Garden i.e., Central Garden and JBS SA go up and down completely randomly.

Pair Corralation between Central Garden and JBS SA

Assuming the 90 days horizon Central Garden Pet is expected to under-perform the JBS SA. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 2.19 times less risky than JBS SA. The stock trades about -0.03 of its potential returns per unit of risk. The JBS SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,313  in JBS SA on December 20, 2024 and sell it today you would earn a total of  76.00  from holding JBS SA or generate 5.79% return on investment over 90 days.

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

Central Garden Pet  vs.  JBS SA

Central Garden Pet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Central Garden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JBS SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, JBS SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Central Garden and JBS SA

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

The idea behind Central Garden Pet and JBS SA 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.