Correlation Between Jerónimo Martins and Mount Gibson

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

By analyzing existing cross correlation between Jernimo Martins SGPS and Mount Gibson Iron, you can compare the effects of market volatilities on Jerónimo Martins and Mount Gibson 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 Jerónimo Martins with a short position of Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jerónimo Martins and Mount Gibson.

Diversification Opportunities for Jerónimo Martins and Mount Gibson

-0.37

Correlation Coefficient

Jerónimo Martins  Mount Gibson

Very good diversification

The 3 months correlation between Jerónimo and Mount is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Jernimo Martins SGPS and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and Jerónimo Martins 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 Jernimo Martins SGPS are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Jerónimo Martins i.e., Jerónimo Martins and Mount Gibson go up and down completely randomly.

Pair Corralation between Jerónimo Martins and Mount Gibson

Assuming the 90 days horizon Jernimo Martins SGPS is expected to generate 0.48 times more return on investment than Mount Gibson. However, Jernimo Martins SGPS is 2.07 times less risky than Mount Gibson. It trades about 0.09 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about -0.01 per unit of risk. If you would invest  1,720  in Jernimo Martins SGPS on October 8, 2024 and sell it today you would earn a total of  165.00  from holding Jernimo Martins SGPS or generate 9.59% return on investment over 90 days.

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

Jernimo Martins SGPS  vs.  Mount Gibson Iron

Jernimo Martins SGPS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jerónimo Martins may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mount Gibson Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mount Gibson Iron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mount Gibson is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Jerónimo Martins and Mount Gibson

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

The idea behind Jernimo Martins SGPS and Mount Gibson Iron 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.