Correlation Between Embassy Office and JM Financial

Can any of the company-specific risk be diversified away by investing in both Embassy Office and JM Financial 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 Embassy Office and JM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Embassy Office Parks and JM Financial Limited, you can compare the effects of market volatilities on Embassy Office and JM Financial 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 Embassy Office with a short position of JM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embassy Office and JM Financial.

Diversification Opportunities for Embassy Office and JM Financial

0.28

Correlation Coefficient

Embassy Office  JM Financial

Modest diversification

The 3 months correlation between Embassy and JMFINANCIL is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Office Parks and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Embassy Office 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 Embassy Office Parks are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Embassy Office i.e., Embassy Office and JM Financial go up and down completely randomly.

Pair Corralation between Embassy Office and JM Financial

Assuming the 90 days trading horizon Embassy Office Parks is expected to under-perform the JM Financial. In addition to that, Embassy Office is 1.19 times more volatile than JM Financial Limited. It trades about -0.04 of its total potential returns per unit of risk. JM Financial Limited is currently generating about 0.26 per unit of volatility. If you would invest  12,977  in JM Financial Limited on September 19, 2024 and sell it today you would earn a total of  823.00  from holding JM Financial Limited or generate 6.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Embassy Office Parks  vs.  JM Financial Limited

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

JM Financial Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embassy Office and JM Financial

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

The idea behind Embassy Office Parks and JM Financial Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.