Correlation Between K1EL34 and JBS SA

Can any of the company-specific risk be diversified away by investing in both K1EL34 and JBS SA 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 K1EL34 and JBS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K1EL34 and JBS SA, you can compare the effects of market volatilities on K1EL34 and JBS SA 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 K1EL34 with a short position of JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of K1EL34 and JBS SA.

Diversification Opportunities for K1EL34 and JBS SA

0.92

Correlation Coefficient

K1EL34  JBS SA

Almost no diversification

The 3 months correlation between K1EL34 and JBS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding K1EL34 and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA and K1EL34 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 K1EL34 are associated (or correlated) with JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of K1EL34 i.e., K1EL34 and JBS SA go up and down completely randomly.

Pair Corralation between K1EL34 and JBS SA

Assuming the 90 days trading horizon K1EL34 is expected to generate 0.73 times more return on investment than JBS SA. However, K1EL34 is 1.38 times less risky than JBS SA. It trades about 0.17 of its potential returns per unit of risk. JBS SA is currently generating about 0.08 per unit of risk. If you would invest  22,869  in K1EL34 on September 26, 2024 and sell it today you would earn a total of  2,431  from holding K1EL34 or generate 10.63% return on investment over 90 days.

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

K1EL34  vs.  JBS SA

K1EL34

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K1EL34 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, K1EL34 sustained solid returns over the last few months and may actually be approaching a breakup point.

JBS SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JBS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K1EL34 and JBS SA

The main advantage of trading using opposite K1EL34 and JBS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K1EL34 position performs unexpectedly, JBS SA 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 JBS SA will offset losses from the drop in JBS SA's long position.

The idea behind K1EL34 and JBS SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.