Correlation Between Jutal Offshore and Northern Trust

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

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

Diversification Opportunities for Jutal Offshore and Northern Trust

-0.66

Correlation Coefficient

Jutal Offshore  Northern Trust

Excellent diversification

The 3 months correlation between Jutal and Northern is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Jutal Offshore Oil and Northern Trust High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust High and Jutal Offshore 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 Jutal Offshore Oil are associated (or correlated) with Northern Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Trust High has no effect on the direction of Jutal Offshore i.e., Jutal Offshore and Northern Trust go up and down completely randomly.

Pair Corralation between Jutal Offshore and Northern Trust

Assuming the 90 days horizon Jutal Offshore Oil is expected to generate 12.57 times more return on investment than Northern Trust. However, Jutal Offshore is 12.57 times more volatile than Northern Trust High. It trades about 0.01 of its potential returns per unit of risk. Northern Trust High is currently generating about 0.04 per unit of risk. If you would invest  2,332  in Jutal Offshore Oil on October 10, 2024 and sell it today you would lose (251.00) from holding Jutal Offshore Oil or give up 10.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Jutal Offshore Oil  vs.  Northern Trust High

Pair Trading with Jutal Offshore and Northern Trust

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

The idea behind Jutal Offshore Oil and Northern Trust High 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.