Correlation Between Kesko Oyj and J Sainsbury

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

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

Diversification Opportunities for Kesko Oyj and J Sainsbury

-0.23

Correlation Coefficient

Kesko Oyj  J Sainsbury

Very good diversification

The 3 months correlation between Kesko and JSNSF is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kesko Oyj ADR and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury plc and Kesko Oyj 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 Kesko Oyj ADR are associated (or correlated) with J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Kesko Oyj i.e., Kesko Oyj and J Sainsbury go up and down completely randomly.

Pair Corralation between Kesko Oyj and J Sainsbury

Assuming the 90 days horizon Kesko Oyj is expected to generate 1.0 times less return on investment than J Sainsbury. But when comparing it to its historical volatility, Kesko Oyj ADR is 4.12 times less risky than J Sainsbury. It trades about 0.11 of its potential returns per unit of risk. J Sainsbury plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  342.00  in J Sainsbury plc on December 29, 2024 and sell it today you would lose (2.00) from holding J Sainsbury plc or give up 0.58% of portfolio value over 90 days.

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

Kesko Oyj ADR  vs.  J Sainsbury plc

Kesko Oyj ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kesko Oyj ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kesko Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

J Sainsbury plc

Risk-Adjusted Performance

Weak

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

Pair Trading with Kesko Oyj and J Sainsbury

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

The idea behind Kesko Oyj ADR and J Sainsbury plc 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.