Correlation Between JS Global and JS Investments

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

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

Diversification Opportunities for JS Global and JS Investments

0.81

Correlation Coefficient

JS Global  JS Investments

Very poor diversification

The 3 months correlation between JSGBETF and JSIL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding JS Global Banking and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments and JS Global 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 JS Global Banking are associated (or correlated) with JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of JS Global i.e., JS Global and JS Investments go up and down completely randomly.

Pair Corralation between JS Global and JS Investments

Assuming the 90 days trading horizon JS Global Banking is expected to generate 0.86 times more return on investment than JS Investments. However, JS Global Banking is 1.16 times less risky than JS Investments. It trades about 0.14 of its potential returns per unit of risk. JS Investments is currently generating about 0.06 per unit of risk. If you would invest  1,633  in JS Global Banking on September 16, 2024 and sell it today you would earn a total of  464.00  from holding JS Global Banking or generate 28.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

JS Global Banking  vs.  JS Investments

JS Global Banking

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JS Global Banking are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, JS Global reported solid returns over the last few months and may actually be approaching a breakup point.

JS Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Global and JS Investments

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

The idea behind JS Global Banking and JS Investments 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.