Correlation Between Jat Holdings and HNB Finance

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

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

Diversification Opportunities for Jat Holdings and HNB Finance

-0.58

Correlation Coefficient

Jat Holdings  HNB Finance

Excellent diversification

The 3 months correlation between Jat and HNB is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Jat Holdings PLC and HNB Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNB Finance and Jat Holdings 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 Jat Holdings PLC are associated (or correlated) with HNB Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNB Finance has no effect on the direction of Jat Holdings i.e., Jat Holdings and HNB Finance go up and down completely randomly.

Pair Corralation between Jat Holdings and HNB Finance

Assuming the 90 days trading horizon Jat Holdings PLC is expected to generate 0.41 times more return on investment than HNB Finance. However, Jat Holdings PLC is 2.44 times less risky than HNB Finance. It trades about 0.48 of its potential returns per unit of risk. HNB Finance is currently generating about -0.07 per unit of risk. If you would invest  1,920  in Jat Holdings PLC on September 23, 2024 and sell it today you would earn a total of  600.00  from holding Jat Holdings PLC or generate 31.25% return on investment over 90 days.

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

Jat Holdings PLC  vs.  HNB Finance

Jat Holdings PLC

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

HNB Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HNB Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jat Holdings and HNB Finance

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

The idea behind Jat Holdings PLC and HNB Finance 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.