Correlation Between JHSF Participaes and Eternit SA

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

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

Diversification Opportunities for JHSF Participaes and Eternit SA

0.64

Correlation Coefficient

JHSF Participaes  Eternit SA

Poor diversification

The 3 months correlation between JHSF and Eternit is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding JHSF Participaes SA and Eternit SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternit SA and JHSF Participaes 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 JHSF Participaes SA are associated (or correlated) with Eternit SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternit SA has no effect on the direction of JHSF Participaes i.e., JHSF Participaes and Eternit SA go up and down completely randomly.

Pair Corralation between JHSF Participaes and Eternit SA

Assuming the 90 days trading horizon JHSF Participaes SA is expected to generate 0.81 times more return on investment than Eternit SA. However, JHSF Participaes SA is 1.23 times less risky than Eternit SA. It trades about -0.01 of its potential returns per unit of risk. Eternit SA is currently generating about -0.04 per unit of risk. If you would invest  501.00  in JHSF Participaes SA on November 20, 2024 and sell it today you would lose (92.00) from holding JHSF Participaes SA or give up 18.36% of portfolio value over 90 days.

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

JHSF Participaes SA  vs.  Eternit SA

JHSF Participaes

Risk-Adjusted Performance

Very Weak

Over the last 90 days JHSF Participaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, JHSF Participaes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Eternit SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eternit SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Eternit SA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with JHSF Participaes and Eternit SA

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

The idea behind JHSF Participaes SA and Eternit SA 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.