Correlation Between Jollibee Foods and Basic Energy

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

By analyzing existing cross correlation between Jollibee Foods Corp and Basic Energy Corp, you can compare the effects of market volatilities on Jollibee Foods and Basic Energy 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 Jollibee Foods with a short position of Basic Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jollibee Foods and Basic Energy.

Diversification Opportunities for Jollibee Foods and Basic Energy

0.17

Correlation Coefficient

Jollibee Foods  Basic Energy

Average diversification

The 3 months correlation between Jollibee and Basic is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Jollibee Foods Corp and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp and Jollibee Foods 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 Jollibee Foods Corp are associated (or correlated) with Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Jollibee Foods i.e., Jollibee Foods and Basic Energy go up and down completely randomly.

Pair Corralation between Jollibee Foods and Basic Energy

Assuming the 90 days trading horizon Jollibee Foods is expected to generate 1.17 times less return on investment than Basic Energy. But when comparing it to its historical volatility, Jollibee Foods Corp is 1.84 times less risky than Basic Energy. It trades about 0.03 of its potential returns per unit of risk. Basic Energy Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Basic Energy Corp on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Basic Energy Corp or generate 0.0% return on investment over 90 days.

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

Jollibee Foods Corp  vs.  Basic Energy Corp

Jollibee Foods Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jollibee Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Basic Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Basic Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jollibee Foods and Basic Energy

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

The idea behind Jollibee Foods Corp and Basic Energy Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.