Correlation Between J Long and Cato

Can any of the company-specific risk be diversified away by investing in both J Long and Cato 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 Cato 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 Cato Corporation, you can compare the effects of market volatilities on J Long and Cato 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 Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Long and Cato.

Diversification Opportunities for J Long and Cato

0.63

Correlation Coefficient

J Long  Cato

Poor diversification

The 3 months correlation between J Long and Cato is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding J Long Group Limited and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato 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 Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of J Long i.e., J Long and Cato go up and down completely randomly.

Pair Corralation between J Long and Cato

Allowing for the 90-day total investment horizon J Long Group Limited is expected to generate 1.49 times more return on investment than Cato. However, J Long is 1.49 times more volatile than Cato Corporation. It trades about 0.4 of its potential returns per unit of risk. Cato Corporation is currently generating about 0.16 per unit of risk. If you would invest  290.00  in J Long Group Limited on October 7, 2024 and sell it today you would earn a total of  164.00  from holding J Long Group Limited or generate 56.55% return on investment over 90 days.

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

J Long Group Limited  vs.  Cato Corp.

J Long Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in J Long Group Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, J Long disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cato

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cato Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with J Long and Cato

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

The idea behind J Long Group Limited and Cato Corporation 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.