Correlation Between Encounter Resources and JB Hi-Fi

Can any of the company-specific risk be diversified away by investing in both Encounter Resources and JB Hi-Fi 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 Encounter Resources and JB Hi-Fi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Encounter Resources and JB Hi Fi, you can compare the effects of market volatilities on Encounter Resources and JB Hi-Fi 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 Encounter Resources with a short position of JB Hi-Fi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encounter Resources and JB Hi-Fi.

Diversification Opportunities for Encounter Resources and JB Hi-Fi

0.1

Correlation Coefficient

Encounter Resources  JB Hi-Fi

Average diversification

The 3 months correlation between Encounter and JBH is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Encounter Resources and JB Hi Fi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hi Fi and Encounter Resources 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 Encounter Resources are associated (or correlated) with JB Hi-Fi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hi Fi has no effect on the direction of Encounter Resources i.e., Encounter Resources and JB Hi-Fi go up and down completely randomly.

Pair Corralation between Encounter Resources and JB Hi-Fi

Assuming the 90 days trading horizon Encounter Resources is expected to under-perform the JB Hi-Fi. In addition to that, Encounter Resources is 2.49 times more volatile than JB Hi Fi. It trades about -0.11 of its total potential returns per unit of risk. JB Hi Fi is currently generating about 0.01 per unit of volatility. If you would invest  9,492  in JB Hi Fi on December 29, 2024 and sell it today you would lose (25.00) from holding JB Hi Fi or give up 0.26% of portfolio value over 90 days.

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

Encounter Resources  vs.  JB Hi Fi

Encounter Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Encounter Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

JB Hi Fi

Risk-Adjusted Performance

Very Weak

Over the last 90 days JB Hi Fi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, JB Hi-Fi is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Encounter Resources and JB Hi-Fi

The main advantage of trading using opposite Encounter Resources and JB Hi-Fi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encounter Resources position performs unexpectedly, JB Hi-Fi 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 JB Hi-Fi will offset losses from the drop in JB Hi-Fi's long position.

The idea behind Encounter Resources and JB Hi Fi 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.