Correlation Between Jackson Financial and New Wave

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

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

Diversification Opportunities for Jackson Financial and New Wave

-0.05

Correlation Coefficient

Jackson Financial  New Wave

Good diversification

The 3 months correlation between Jackson and New is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jackson Financial and New Wave Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Wave Holdings and Jackson Financial 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 Jackson Financial are associated (or correlated) with New Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Wave Holdings has no effect on the direction of Jackson Financial i.e., Jackson Financial and New Wave go up and down completely randomly.

Pair Corralation between Jackson Financial and New Wave

Assuming the 90 days trading horizon Jackson Financial is expected to under-perform the New Wave. But the preferred stock apears to be less risky and, when comparing its historical volatility, Jackson Financial is 25.6 times less risky than New Wave. The preferred stock trades about -0.03 of its potential returns per unit of risk. The New Wave Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.21  in New Wave Holdings on December 1, 2024 and sell it today you would earn a total of  0.19  from holding New Wave Holdings or generate 15.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Jackson Financial  vs.  New Wave Holdings

Jackson Financial

Risk-Adjusted Performance

Very Weak

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

New Wave Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Wave reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jackson Financial and New Wave

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

The idea behind Jackson Financial and New Wave Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.