Correlation Between JAIZ BANK and IKEJA HOTELS

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

By analyzing existing cross correlation between JAIZ BANK PLC and IKEJA HOTELS PLC, you can compare the effects of market volatilities on JAIZ BANK and IKEJA HOTELS 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 JAIZ BANK with a short position of IKEJA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAIZ BANK and IKEJA HOTELS.

Diversification Opportunities for JAIZ BANK and IKEJA HOTELS

0.87

Correlation Coefficient

JAIZ BANK  IKEJA HOTELS

Very poor diversification

The 3 months correlation between JAIZ and IKEJA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JAIZ BANK PLC and IKEJA HOTELS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IKEJA HOTELS PLC and JAIZ BANK 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 JAIZ BANK PLC are associated (or correlated) with IKEJA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IKEJA HOTELS PLC has no effect on the direction of JAIZ BANK i.e., JAIZ BANK and IKEJA HOTELS go up and down completely randomly.

Pair Corralation between JAIZ BANK and IKEJA HOTELS

Assuming the 90 days trading horizon JAIZ BANK is expected to generate 1.87 times less return on investment than IKEJA HOTELS. But when comparing it to its historical volatility, JAIZ BANK PLC is 1.19 times less risky than IKEJA HOTELS. It trades about 0.08 of its potential returns per unit of risk. IKEJA HOTELS PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  110.00  in IKEJA HOTELS PLC on October 10, 2024 and sell it today you would earn a total of  1,125  from holding IKEJA HOTELS PLC or generate 1022.73% return on investment over 90 days.

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

JAIZ BANK PLC  vs.  IKEJA HOTELS PLC

JAIZ BANK PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAIZ BANK PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, JAIZ BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

IKEJA HOTELS PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IKEJA HOTELS PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IKEJA HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAIZ BANK and IKEJA HOTELS

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

The idea behind JAIZ BANK PLC and IKEJA HOTELS PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.