Correlation Between JUST and Frax

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

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

Diversification Opportunities for JUST and Frax

-0.09

Correlation Coefficient

JUST  Frax

Good diversification

The 3 months correlation between JUST and Frax is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding JUST and Frax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frax and JUST 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 JUST are associated (or correlated) with Frax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frax has no effect on the direction of JUST i.e., JUST and Frax go up and down completely randomly.

Pair Corralation between JUST and Frax

Assuming the 90 days trading horizon JUST is expected to generate 1.62 times more return on investment than Frax. However, JUST is 1.62 times more volatile than Frax. It trades about 0.15 of its potential returns per unit of risk. Frax is currently generating about 0.02 per unit of risk. If you would invest  2.93  in JUST on September 3, 2024 and sell it today you would earn a total of  1.00  from holding JUST or generate 34.13% return on investment over 90 days.

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

JUST  vs.  Frax

JUST

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JUST are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JUST exhibited solid returns over the last few months and may actually be approaching a breakup point.

Frax

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Frax are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Frax is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JUST and Frax

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

The idea behind JUST and Frax 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.