Correlation Between J Long and Advance Auto

Can any of the company-specific risk be diversified away by investing in both J Long and Advance Auto 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 J Long and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between J Long Group Limited and Advance Auto Parts, you can compare the effects of market volatilities on J Long and Advance Auto 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 J Long with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Long and Advance Auto.

Diversification Opportunities for J Long and Advance Auto

-0.6

Correlation Coefficient

J Long  Advance Auto

Excellent diversification

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

Pair Corralation between J Long and Advance Auto

Allowing for the 90-day total investment horizon J Long is expected to generate 1.15 times less return on investment than Advance Auto. In addition to that, J Long is 3.67 times more volatile than Advance Auto Parts. It trades about 0.01 of its total potential returns per unit of risk. Advance Auto Parts is currently generating about 0.05 per unit of volatility. If you would invest  4,087  in Advance Auto Parts on September 14, 2024 and sell it today you would earn a total of  317.00  from holding Advance Auto Parts or generate 7.76% return on investment over 90 days.

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

J Long Group Limited  vs.  Advance Auto Parts

J Long Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Long Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating essential indicators, J Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Advance Auto Parts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advance Auto Parts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Advance Auto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with J Long and Advance Auto

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

The idea behind J Long Group Limited and Advance Auto Parts 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.