Correlation Between John B and Associated British

Can any of the company-specific risk be diversified away by investing in both John B and Associated British 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 John B and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John B Sanfilippo and Associated British Foods, you can compare the effects of market volatilities on John B and Associated British 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 John B with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of John B and Associated British.

Diversification Opportunities for John B and Associated British

0.73

Correlation Coefficient

John B  Associated British

Poor diversification

The 3 months correlation between John and Associated is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding John B Sanfilippo and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and John B 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 John B Sanfilippo are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of John B i.e., John B and Associated British go up and down completely randomly.

Pair Corralation between John B and Associated British

Given the investment horizon of 90 days John B Sanfilippo is expected to under-perform the Associated British. In addition to that, John B is 1.2 times more volatile than Associated British Foods. It trades about 0.0 of its total potential returns per unit of risk. Associated British Foods is currently generating about 0.01 per unit of volatility. If you would invest  2,845  in Associated British Foods on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Associated British Foods or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

John B Sanfilippo  vs.  Associated British Foods

John B Sanfilippo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John B Sanfilippo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, John B is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Associated British is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with John B and Associated British

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

The idea behind John B Sanfilippo and Associated British Foods 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.