Correlation Between JS Investments and MCB Investment

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

By analyzing existing cross correlation between JS Investments and MCB Investment Manag, you can compare the effects of market volatilities on JS Investments and MCB Investment 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 MCB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of JS Investments and MCB Investment.

Diversification Opportunities for JS Investments and MCB Investment

-0.49

Correlation Coefficient

JS Investments  MCB Investment

Very good diversification

The 3 months correlation between JSIL and MCB is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and MCB Investment Manag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Investment Manag 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 MCB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Investment Manag has no effect on the direction of JS Investments i.e., JS Investments and MCB Investment go up and down completely randomly.

Pair Corralation between JS Investments and MCB Investment

Assuming the 90 days trading horizon JS Investments is expected to under-perform the MCB Investment. In addition to that, JS Investments is 1.23 times more volatile than MCB Investment Manag. It trades about -0.02 of its total potential returns per unit of risk. MCB Investment Manag is currently generating about 0.15 per unit of volatility. If you would invest  6,495  in MCB Investment Manag on December 29, 2024 and sell it today you would earn a total of  1,628  from holding MCB Investment Manag or generate 25.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

JS Investments  vs.  MCB Investment Manag

JS Investments

Risk-Adjusted Performance

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.

MCB Investment Manag

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Investment Manag are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, MCB Investment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Investments and MCB Investment

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

The idea behind JS Investments and MCB Investment Manag 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.