Correlation Between Jeudan and Laan Spar

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

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

Diversification Opportunities for Jeudan and Laan Spar

-0.62

Correlation Coefficient

Jeudan  Laan Spar

Excellent diversification

The 3 months correlation between Jeudan and Laan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Jeudan and Laan Spar Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laan Spar Bank and Jeudan 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 Jeudan are associated (or correlated) with Laan Spar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laan Spar Bank has no effect on the direction of Jeudan i.e., Jeudan and Laan Spar go up and down completely randomly.

Pair Corralation between Jeudan and Laan Spar

Assuming the 90 days trading horizon Jeudan is expected to under-perform the Laan Spar. In addition to that, Jeudan is 1.17 times more volatile than Laan Spar Bank. It trades about -0.05 of its total potential returns per unit of risk. Laan Spar Bank is currently generating about 0.19 per unit of volatility. If you would invest  69,500  in Laan Spar Bank on December 22, 2024 and sell it today you would earn a total of  9,000  from holding Laan Spar Bank or generate 12.95% return on investment over 90 days.

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

Jeudan  vs.  Laan Spar Bank

Jeudan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jeudan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jeudan is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Laan Spar Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laan Spar Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laan Spar displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeudan and Laan Spar

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

The idea behind Jeudan and Laan Spar Bank 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.