Correlation Between JB Hi and COG Financial

Can any of the company-specific risk be diversified away by investing in both JB Hi and COG 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 COG 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 COG Financial Services, you can compare the effects of market volatilities on JB Hi and COG 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 COG Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Hi and COG Financial.

Diversification Opportunities for JB Hi and COG Financial

-0.73

Correlation Coefficient

JB Hi  COG Financial

Pay attention - limited upside

The 3 months correlation between JBH and COG is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding JB Hi Fi and COG Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COG Financial Services 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 COG Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COG Financial Services has no effect on the direction of JB Hi i.e., JB Hi and COG Financial go up and down completely randomly.

Pair Corralation between JB Hi and COG Financial

Assuming the 90 days trading horizon JB Hi Fi is expected to generate 0.64 times more return on investment than COG Financial. However, JB Hi Fi is 1.57 times less risky than COG Financial. It trades about 0.2 of its potential returns per unit of risk. COG Financial Services is currently generating about 0.01 per unit of risk. If you would invest  7,825  in JB Hi Fi on September 21, 2024 and sell it today you would earn a total of  1,586  from holding JB Hi Fi or generate 20.27% return on investment over 90 days.

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

JB Hi Fi  vs.  COG Financial Services

JB Hi Fi

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hi Fi are ranked lower than 15 (%) 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.

COG Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COG Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, COG Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JB Hi and COG Financial

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

The idea behind JB Hi Fi and COG Financial Services 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.