Correlation Between JS Investments and NetSol Technologies

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

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

Diversification Opportunities for JS Investments and NetSol Technologies

0.4

Correlation Coefficient

JS Investments  NetSol Technologies

Very weak diversification

The 3 months correlation between JSIL and NetSol is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of JS Investments i.e., JS Investments and NetSol Technologies go up and down completely randomly.

Pair Corralation between JS Investments and NetSol Technologies

Assuming the 90 days trading horizon JS Investments is expected to under-perform the NetSol Technologies. In addition to that, JS Investments is 1.72 times more volatile than NetSol Technologies. It trades about -0.04 of its total potential returns per unit of risk. NetSol Technologies is currently generating about -0.05 per unit of volatility. If you would invest  15,315  in NetSol Technologies on December 23, 2024 and sell it today you would lose (1,118) from holding NetSol Technologies or give up 7.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

JS Investments  vs.  NetSol Technologies

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NetSol Technologies

Risk-Adjusted Performance

Very Weak

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

Pair Trading with JS Investments and NetSol Technologies

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

The idea behind JS Investments and NetSol Technologies 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.