Correlation Between Jardine Matheson and Cullen/Frost Bankers

Can any of the company-specific risk be diversified away by investing in both Jardine Matheson and Cullen/Frost Bankers 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 Jardine Matheson and Cullen/Frost Bankers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jardine Matheson Holdings and CullenFrost Bankers, you can compare the effects of market volatilities on Jardine Matheson and Cullen/Frost Bankers 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 Jardine Matheson with a short position of Cullen/Frost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jardine Matheson and Cullen/Frost Bankers.

Diversification Opportunities for Jardine Matheson and Cullen/Frost Bankers

0.85

Correlation Coefficient

Jardine Matheson  Cullen/Frost Bankers

Very poor diversification

The 3 months correlation between Jardine and Cullen/Frost is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jardine Matheson Holdings and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen/Frost Bankers and Jardine Matheson 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 Jardine Matheson Holdings are associated (or correlated) with Cullen/Frost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen/Frost Bankers has no effect on the direction of Jardine Matheson i.e., Jardine Matheson and Cullen/Frost Bankers go up and down completely randomly.

Pair Corralation between Jardine Matheson and Cullen/Frost Bankers

Assuming the 90 days horizon Jardine Matheson is expected to generate 2.0 times less return on investment than Cullen/Frost Bankers. But when comparing it to its historical volatility, Jardine Matheson Holdings is 1.09 times less risky than Cullen/Frost Bankers. It trades about 0.1 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,228  in CullenFrost Bankers on October 8, 2024 and sell it today you would earn a total of  2,672  from holding CullenFrost Bankers or generate 26.12% return on investment over 90 days.

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

Jardine Matheson Holdings  vs.  CullenFrost Bankers

Jardine Matheson Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jardine Matheson Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Jardine Matheson reported solid returns over the last few months and may actually be approaching a breakup point.

Cullen/Frost Bankers

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CullenFrost Bankers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cullen/Frost Bankers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jardine Matheson and Cullen/Frost Bankers

The main advantage of trading using opposite Jardine Matheson and Cullen/Frost Bankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jardine Matheson position performs unexpectedly, Cullen/Frost Bankers 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 Cullen/Frost Bankers will offset losses from the drop in Cullen/Frost Bankers' long position.

The idea behind Jardine Matheson Holdings and CullenFrost Bankers 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.