Correlation Between J Sainsbury and Dairy Farm

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

By analyzing existing cross correlation between J Sainsbury PLC and Dairy Farm International, you can compare the effects of market volatilities on J Sainsbury and Dairy Farm 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 Sainsbury with a short position of Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Sainsbury and Dairy Farm.

Diversification Opportunities for J Sainsbury and Dairy Farm

-0.89

Correlation Coefficient

J Sainsbury  Dairy Farm

Pay attention - limited upside

The 3 months correlation between JSAIY and Dairy is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding J Sainsbury PLC and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International and J Sainsbury 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 Sainsbury PLC are associated (or correlated) with Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of J Sainsbury i.e., J Sainsbury and Dairy Farm go up and down completely randomly.

Pair Corralation between J Sainsbury and Dairy Farm

Assuming the 90 days horizon J Sainsbury PLC is expected to under-perform the Dairy Farm. But the otc stock apears to be less risky and, when comparing its historical volatility, J Sainsbury PLC is 1.13 times less risky than Dairy Farm. The otc stock trades about -0.19 of its potential returns per unit of risk. The Dairy Farm International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Dairy Farm International on August 31, 2024 and sell it today you would earn a total of  33.00  from holding Dairy Farm International or generate 17.84% return on investment over 90 days.

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

J Sainsbury PLC  vs.  Dairy Farm International

J Sainsbury PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Sainsbury PLC 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 forward indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Dairy Farm International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with J Sainsbury and Dairy Farm

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

The idea behind J Sainsbury PLC and Dairy Farm International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.