Correlation Between JBS SA and Equity Residential

Can any of the company-specific risk be diversified away by investing in both JBS SA and Equity Residential 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 JBS SA and Equity Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JBS SA and Equity Residential, you can compare the effects of market volatilities on JBS SA and Equity Residential 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 JBS SA with a short position of Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of JBS SA and Equity Residential.

Diversification Opportunities for JBS SA and Equity Residential

0.8

Correlation Coefficient

JBS SA  Equity Residential

Very poor diversification

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

Pair Corralation between JBS SA and Equity Residential

Assuming the 90 days trading horizon JBS SA is expected to under-perform the Equity Residential. In addition to that, JBS SA is 12.26 times more volatile than Equity Residential. It trades about -0.21 of its total potential returns per unit of risk. Equity Residential is currently generating about 0.24 per unit of volatility. If you would invest  22,082  in Equity Residential on October 13, 2024 and sell it today you would earn a total of  138.00  from holding Equity Residential or generate 0.62% return on investment over 90 days.

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

JBS SA  vs.  Equity Residential

JBS SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JBS SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Equity Residential

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Residential are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Equity Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JBS SA and Equity Residential

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

The idea behind JBS SA and Equity Residential 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.