Correlation Between Collins Foods and Jupiter Energy

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

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

Diversification Opportunities for Collins Foods and Jupiter Energy

0.25

Correlation Coefficient

Collins Foods  Jupiter Energy

Modest diversification

The 3 months correlation between Collins and Jupiter is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Jupiter Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jupiter Energy and Collins Foods 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 Collins Foods are associated (or correlated) with Jupiter Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jupiter Energy has no effect on the direction of Collins Foods i.e., Collins Foods and Jupiter Energy go up and down completely randomly.

Pair Corralation between Collins Foods and Jupiter Energy

Assuming the 90 days trading horizon Collins Foods is expected to generate 2.5 times less return on investment than Jupiter Energy. But when comparing it to its historical volatility, Collins Foods is 7.77 times less risky than Jupiter Energy. It trades about 0.15 of its potential returns per unit of risk. Jupiter Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.90  in Jupiter Energy on August 31, 2024 and sell it today you would earn a total of  0.10  from holding Jupiter Energy or generate 3.45% return on investment over 90 days.

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

Collins Foods  vs.  Jupiter Energy

Collins Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Collins Foods may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Jupiter Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jupiter Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Jupiter Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Collins Foods and Jupiter Energy

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

The idea behind Collins Foods and Jupiter Energy 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.