Correlation Between Jat Holdings and Keells Food

Can any of the company-specific risk be diversified away by investing in both Jat Holdings and Keells Food 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 Keells Food 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 Keells Food Products, you can compare the effects of market volatilities on Jat Holdings and Keells Food 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 Keells Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jat Holdings and Keells Food.

Diversification Opportunities for Jat Holdings and Keells Food

0.78

Correlation Coefficient

Jat Holdings  Keells Food

Poor diversification

The 3 months correlation between Jat and Keells is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Jat Holdings PLC and Keells Food Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keells Food Products 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 Keells Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keells Food Products has no effect on the direction of Jat Holdings i.e., Jat Holdings and Keells Food go up and down completely randomly.

Pair Corralation between Jat Holdings and Keells Food

Assuming the 90 days trading horizon Jat Holdings PLC is expected to generate 1.12 times more return on investment than Keells Food. However, Jat Holdings is 1.12 times more volatile than Keells Food Products. It trades about 0.03 of its potential returns per unit of risk. Keells Food Products is currently generating about -0.07 per unit of risk. If you would invest  2,520  in Jat Holdings PLC on October 14, 2024 and sell it today you would earn a total of  20.00  from holding Jat Holdings PLC or generate 0.79% return on investment over 90 days.

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

Jat Holdings PLC  vs.  Keells Food Products

Jat Holdings PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 18 (%) 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.

Keells Food Products

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keells Food Products are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Keells Food 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 Keells Food

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

The idea behind Jat Holdings PLC and Keells Food Products 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.