Correlation Between JB Hi and SG Fleet

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

Diversification Opportunities for JB Hi and SG Fleet

0.87

Correlation Coefficient

JB Hi  SG Fleet

Very poor diversification

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

Pair Corralation between JB Hi and SG Fleet

Assuming the 90 days trading horizon JB Hi Fi is expected to generate 0.74 times more return on investment than SG Fleet. However, JB Hi Fi is 1.36 times less risky than SG Fleet. It trades about 0.23 of its potential returns per unit of risk. SG Fleet Group is currently generating about 0.04 per unit of risk. If you would invest  6,018  in JB Hi Fi on September 29, 2024 and sell it today you would earn a total of  3,644  from holding JB Hi Fi or generate 60.55% return on investment over 90 days.

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

JB Hi Fi  vs.  SG Fleet Group

JB Hi Fi

Risk-Adjusted Performance

15 of 100

Solid

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.

SG Fleet Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SG Fleet Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, SG Fleet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JB Hi and SG Fleet

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

The idea behind JB Hi Fi and SG Fleet Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.