Correlation Between JS Investments and United Bank

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

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

Diversification Opportunities for JS Investments and United Bank

0.31

Correlation Coefficient

JS Investments  United Bank

Weak diversification

The 3 months correlation between JSIL and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bank 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of JS Investments i.e., JS Investments and United Bank go up and down completely randomly.

Pair Corralation between JS Investments and United Bank

Assuming the 90 days trading horizon JS Investments is expected to generate 4.23 times less return on investment than United Bank. In addition to that, JS Investments is 1.94 times more volatile than United Bank. It trades about 0.03 of its total potential returns per unit of risk. United Bank is currently generating about 0.25 per unit of volatility. If you would invest  29,438  in United Bank on October 23, 2024 and sell it today you would earn a total of  10,260  from holding United Bank or generate 34.85% return on investment over 90 days.

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

JS Investments  vs.  United Bank

JS Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

United Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, United Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Investments and United Bank

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

The idea behind JS Investments and United Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.