Correlation Between E M and Jat Holdings

Can any of the company-specific risk be diversified away by investing in both E M and Jat Holdings 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 E M and Jat Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E M L and Jat Holdings PLC, you can compare the effects of market volatilities on E M and Jat Holdings 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 E M with a short position of Jat Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of E M and Jat Holdings.

Diversification Opportunities for E M and Jat Holdings

0.76

Correlation Coefficient

E M  Jat Holdings

Poor diversification

The 3 months correlation between EMLN0000 and Jat is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding E M L and Jat Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jat Holdings PLC and E M 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 E M L are associated (or correlated) with Jat Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jat Holdings PLC has no effect on the direction of E M i.e., E M and Jat Holdings go up and down completely randomly.

Pair Corralation between E M and Jat Holdings

Assuming the 90 days trading horizon E M is expected to generate 1.32 times less return on investment than Jat Holdings. In addition to that, E M is 1.73 times more volatile than Jat Holdings PLC. It trades about 0.07 of its total potential returns per unit of risk. Jat Holdings PLC is currently generating about 0.15 per unit of volatility. If you would invest  1,860  in Jat Holdings PLC on October 20, 2024 and sell it today you would earn a total of  870.00  from holding Jat Holdings PLC or generate 46.77% return on investment over 90 days.

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

E M L  vs.  Jat Holdings PLC

E M L

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Jat Holdings PLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E M and Jat Holdings

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

The idea behind E M L and Jat Holdings PLC 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.