Correlation Between Jasmine International and Beauty Community

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

By analyzing existing cross correlation between Jasmine International Public and Beauty Community Public, you can compare the effects of market volatilities on Jasmine International and Beauty Community 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 Jasmine International with a short position of Beauty Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jasmine International and Beauty Community.

Diversification Opportunities for Jasmine International and Beauty Community

0.36

Correlation Coefficient

Jasmine International  Beauty Community

Weak diversification

The 3 months correlation between Jasmine and Beauty is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Jasmine International Public and Beauty Community Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Community Public and Jasmine International 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 Jasmine International Public are associated (or correlated) with Beauty Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Community Public has no effect on the direction of Jasmine International i.e., Jasmine International and Beauty Community go up and down completely randomly.

Pair Corralation between Jasmine International and Beauty Community

Assuming the 90 days trading horizon Jasmine International Public is expected to under-perform the Beauty Community. But the stock apears to be less risky and, when comparing its historical volatility, Jasmine International Public is 40.57 times less risky than Beauty Community. The stock trades about -0.03 of its potential returns per unit of risk. The Beauty Community Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Beauty Community Public on September 2, 2024 and sell it today you would lose (3.00) from holding Beauty Community Public or give up 6.98% of portfolio value over 90 days.

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

Jasmine International Public  vs.  Beauty Community Public

Jasmine International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jasmine International Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Jasmine International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Beauty Community Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beauty Community Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Beauty Community sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jasmine International and Beauty Community

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

The idea behind Jasmine International Public and Beauty Community Public 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.