Correlation Between Eq Energy and JSE

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

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

Diversification Opportunities for Eq Energy and JSE

-0.35

Correlation Coefficient

Eq Energy  JSE

Very good diversification

The 3 months correlation between EQLB and JSE is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and Eq Energy 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 Eq Energy Drink are associated (or correlated) with JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of Eq Energy i.e., Eq Energy and JSE go up and down completely randomly.

Pair Corralation between Eq Energy and JSE

Given the investment horizon of 90 days Eq Energy Drink is expected to generate 7.93 times more return on investment than JSE. However, Eq Energy is 7.93 times more volatile than JSE Limited. It trades about 0.05 of its potential returns per unit of risk. JSE Limited is currently generating about 0.11 per unit of risk. If you would invest  0.15  in Eq Energy Drink on September 25, 2024 and sell it today you would lose (0.08) from holding Eq Energy Drink or give up 53.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Eq Energy Drink  vs.  JSE Limited

Eq Energy Drink

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eq Energy Drink are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Eq Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

JSE Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, JSE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eq Energy and JSE

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

The idea behind Eq Energy Drink and JSE 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.