Correlation Between Jade Leader and North Arrow

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

By analyzing existing cross correlation between Jade Leader Corp and North Arrow Minerals, you can compare the effects of market volatilities on Jade Leader and North Arrow 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 Jade Leader with a short position of North Arrow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jade Leader and North Arrow.

Diversification Opportunities for Jade Leader and North Arrow

-0.23

Correlation Coefficient

Jade Leader  North Arrow

Very good diversification

The 3 months correlation between Jade and North is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Jade Leader Corp and North Arrow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Arrow Minerals and Jade Leader 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 Jade Leader Corp are associated (or correlated) with North Arrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Arrow Minerals has no effect on the direction of Jade Leader i.e., Jade Leader and North Arrow go up and down completely randomly.

Pair Corralation between Jade Leader and North Arrow

Assuming the 90 days trading horizon Jade Leader Corp is expected to generate 5.56 times more return on investment than North Arrow. However, Jade Leader is 5.56 times more volatile than North Arrow Minerals. It trades about 0.13 of its potential returns per unit of risk. North Arrow Minerals is currently generating about -0.02 per unit of risk. If you would invest  2.00  in Jade Leader Corp on December 28, 2024 and sell it today you would earn a total of  2.00  from holding Jade Leader Corp or generate 100.0% return on investment over 90 days.

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

Jade Leader Corp  vs.  North Arrow Minerals

Jade Leader Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jade Leader Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Jade Leader showed solid returns over the last few months and may actually be approaching a breakup point.

North Arrow Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Arrow Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, North Arrow is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Jade Leader and North Arrow

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

The idea behind Jade Leader Corp and North Arrow Minerals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.