Correlation Between JB Hi and Change Financial

Can any of the company-specific risk be diversified away by investing in both JB Hi and Change Financial 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 JB Hi and Change Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JB Hi Fi and Change Financial Limited, you can compare the effects of market volatilities on JB Hi and Change Financial 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 JB Hi with a short position of Change Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Hi and Change Financial.

Diversification Opportunities for JB Hi and Change Financial

-0.87

Correlation Coefficient

JB Hi  Change Financial

Pay attention - limited upside

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

Pair Corralation between JB Hi and Change Financial

Assuming the 90 days trading horizon JB Hi Fi is expected to generate 0.27 times more return on investment than Change Financial. However, JB Hi Fi is 3.72 times less risky than Change Financial. It trades about 0.13 of its potential returns per unit of risk. Change Financial Limited is currently generating about 0.03 per unit of risk. If you would invest  3,792  in JB Hi Fi on September 24, 2024 and sell it today you would earn a total of  5,398  from holding JB Hi Fi or generate 142.35% return on investment over 90 days.

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

JB Hi Fi  vs.  Change Financial Limited

JB Hi Fi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hi Fi are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, JB Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Change Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Change Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with JB Hi and Change Financial

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

The idea behind JB Hi Fi and Change Financial Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.