Correlation Between JERONIMO MARTINS and Highlight Communications

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

By analyzing existing cross correlation between JERONIMO MARTINS UNADR2 and Highlight Communications AG, you can compare the effects of market volatilities on JERONIMO MARTINS and Highlight Communications 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 JERONIMO MARTINS with a short position of Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of JERONIMO MARTINS and Highlight Communications.

Diversification Opportunities for JERONIMO MARTINS and Highlight Communications

0.6

Correlation Coefficient

JERONIMO MARTINS  Highlight Communications

Poor diversification

The 3 months correlation between JERONIMO and Highlight is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding JERONIMO MARTINS UNADR2 and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and JERONIMO 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 JERONIMO MARTINS UNADR2 are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of JERONIMO MARTINS i.e., JERONIMO MARTINS and Highlight Communications go up and down completely randomly.

Pair Corralation between JERONIMO MARTINS and Highlight Communications

Assuming the 90 days trading horizon JERONIMO MARTINS UNADR2 is expected to generate 0.54 times more return on investment than Highlight Communications. However, JERONIMO MARTINS UNADR2 is 1.85 times less risky than Highlight Communications. It trades about -0.01 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.04 per unit of risk. If you would invest  4,104  in JERONIMO MARTINS UNADR2 on October 11, 2024 and sell it today you would lose (384.00) from holding JERONIMO MARTINS UNADR2 or give up 9.36% of portfolio value over 90 days.

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

JERONIMO MARTINS UNADR2  vs.  Highlight Communications AG

JERONIMO MARTINS UNADR2

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JERONIMO MARTINS UNADR2 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, JERONIMO MARTINS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Highlight Communications

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JERONIMO MARTINS and Highlight Communications

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

The idea behind JERONIMO MARTINS UNADR2 and Highlight Communications AG 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.