Correlation Between Jack Henry and Applied Digital

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

By analyzing existing cross correlation between Jack Henry Associates and Applied Digital, you can compare the effects of market volatilities on Jack Henry and Applied Digital 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 Jack Henry with a short position of Applied Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jack Henry and Applied Digital.

Diversification Opportunities for Jack Henry and Applied Digital

-0.42

Correlation Coefficient

Jack Henry  Applied Digital

Very good diversification

The 3 months correlation between Jack and Applied is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Jack Henry Associates and Applied Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Digital and Jack Henry 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 Jack Henry Associates are associated (or correlated) with Applied Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Digital has no effect on the direction of Jack Henry i.e., Jack Henry and Applied Digital go up and down completely randomly.

Pair Corralation between Jack Henry and Applied Digital

Given the investment horizon of 90 days Jack Henry Associates is expected to under-perform the Applied Digital. But the stock apears to be less risky and, when comparing its historical volatility, Jack Henry Associates is 8.17 times less risky than Applied Digital. The stock trades about -0.17 of its potential returns per unit of risk. The Applied Digital is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  637.00  in Applied Digital on October 6, 2024 and sell it today you would earn a total of  274.00  from holding Applied Digital or generate 43.01% return on investment over 90 days.

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

Jack Henry Associates  vs.  Applied Digital

Jack Henry Associates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jack Henry Associates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Jack Henry is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Applied Digital

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Digital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jack Henry and Applied Digital

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

The idea behind Jack Henry Associates and Applied Digital 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.