Correlation Between JBG SMITH and Analog Devices

Can any of the company-specific risk be diversified away by investing in both JBG SMITH and Analog Devices 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 JBG SMITH and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JBG SMITH Properties and Analog Devices, you can compare the effects of market volatilities on JBG SMITH and Analog Devices 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 JBG SMITH with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of JBG SMITH and Analog Devices.

Diversification Opportunities for JBG SMITH and Analog Devices

0.8

Correlation Coefficient

JBG SMITH  Analog Devices

Very poor diversification

The 3 months correlation between JBG and Analog is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding JBG SMITH Properties and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and JBG SMITH 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 JBG SMITH Properties are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of JBG SMITH i.e., JBG SMITH and Analog Devices go up and down completely randomly.

Pair Corralation between JBG SMITH and Analog Devices

Given the investment horizon of 90 days JBG SMITH Properties is expected to generate 1.22 times more return on investment than Analog Devices. However, JBG SMITH is 1.22 times more volatile than Analog Devices. It trades about 0.27 of its potential returns per unit of risk. Analog Devices is currently generating about 0.08 per unit of risk. If you would invest  1,491  in JBG SMITH Properties on September 18, 2024 and sell it today you would earn a total of  156.00  from holding JBG SMITH Properties or generate 10.46% return on investment over 90 days.

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

JBG SMITH Properties  vs.  Analog Devices

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with JBG SMITH and Analog Devices

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

The idea behind JBG SMITH Properties and Analog Devices 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.