Correlation Between Jefferies Financial and Target

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

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

Diversification Opportunities for Jefferies Financial and Target

-0.46

Correlation Coefficient

Jefferies Financial  Target

Very good diversification

The 3 months correlation between Jefferies and Target is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Jefferies Financial Group and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Jefferies Financial 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 Jefferies Financial Group are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Jefferies Financial i.e., Jefferies Financial and Target go up and down completely randomly.

Pair Corralation between Jefferies Financial and Target

Assuming the 90 days trading horizon Jefferies Financial is expected to generate 1.96 times less return on investment than Target. But when comparing it to its historical volatility, Jefferies Financial Group is 1.07 times less risky than Target. It trades about 0.09 of its potential returns per unit of risk. Target is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  79,519  in Target on October 4, 2024 and sell it today you would earn a total of  4,985  from holding Target or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Jefferies Financial Group  vs.  Target

Jefferies Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Target

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Target may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jefferies Financial and Target

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

The idea behind Jefferies Financial Group and Target 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.