Correlation Between JS Investments and Mari Petroleum

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

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

Diversification Opportunities for JS Investments and Mari Petroleum

0.43

Correlation Coefficient

JS Investments  Mari Petroleum

Very weak diversification

The 3 months correlation between JSIL and Mari is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum and JS Investments 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 Investments are associated (or correlated) with Mari Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mari Petroleum has no effect on the direction of JS Investments i.e., JS Investments and Mari Petroleum go up and down completely randomly.

Pair Corralation between JS Investments and Mari Petroleum

Assuming the 90 days trading horizon JS Investments is expected to generate 1.51 times more return on investment than Mari Petroleum. However, JS Investments is 1.51 times more volatile than Mari Petroleum. It trades about -0.1 of its potential returns per unit of risk. Mari Petroleum is currently generating about -0.25 per unit of risk. If you would invest  2,584  in JS Investments on October 25, 2024 and sell it today you would lose (273.00) from holding JS Investments or give up 10.57% of portfolio value over 90 days.

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

JS Investments  vs.  Mari Petroleum

JS Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JS Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JS Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mari Petroleum

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mari Petroleum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mari Petroleum sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Investments and Mari Petroleum

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

The idea behind JS Investments and Mari Petroleum 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.