Correlation Between Jack Chia and Pato Chemical

Can any of the company-specific risk be diversified away by investing in both Jack Chia and Pato Chemical 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 Jack Chia and Pato Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jack Chia Industries and Pato Chemical Industry, you can compare the effects of market volatilities on Jack Chia and Pato Chemical 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 Jack Chia with a short position of Pato Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jack Chia and Pato Chemical.

Diversification Opportunities for Jack Chia and Pato Chemical

0.25

Correlation Coefficient

Jack Chia  Pato Chemical

Modest diversification

The 3 months correlation between Jack and Pato is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Jack Chia Industries and Pato Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pato Chemical Industry and Jack Chia 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 Jack Chia Industries are associated (or correlated) with Pato Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pato Chemical Industry has no effect on the direction of Jack Chia i.e., Jack Chia and Pato Chemical go up and down completely randomly.

Pair Corralation between Jack Chia and Pato Chemical

Assuming the 90 days trading horizon Jack Chia Industries is expected to generate 0.88 times more return on investment than Pato Chemical. However, Jack Chia Industries is 1.14 times less risky than Pato Chemical. It trades about -0.03 of its potential returns per unit of risk. Pato Chemical Industry is currently generating about -0.32 per unit of risk. If you would invest  8,100  in Jack Chia Industries on September 15, 2024 and sell it today you would lose (25.00) from holding Jack Chia Industries or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Jack Chia Industries  vs.  Pato Chemical Industry

Jack Chia Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jack Chia Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Jack Chia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pato Chemical Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pato Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Jack Chia and Pato Chemical

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

The idea behind Jack Chia Industries and Pato Chemical Industry 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.