Correlation Between Kaiser Aluminum and J+J SNACK

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

By analyzing existing cross correlation between Kaiser Aluminum and JJ SNACK FOODS, you can compare the effects of market volatilities on Kaiser Aluminum and J+J SNACK 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 Kaiser Aluminum with a short position of J+J SNACK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and J+J SNACK.

Diversification Opportunities for Kaiser Aluminum and J+J SNACK

0.81

Correlation Coefficient

Kaiser Aluminum  J+J SNACK

Very poor diversification

The 3 months correlation between Kaiser and J+J is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and JJ SNACK FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJ SNACK FOODS and Kaiser Aluminum 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 Kaiser Aluminum are associated (or correlated) with J+J SNACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJ SNACK FOODS has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and J+J SNACK go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and J+J SNACK

Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 2.11 times more return on investment than J+J SNACK. However, Kaiser Aluminum is 2.11 times more volatile than JJ SNACK FOODS. It trades about 0.02 of its potential returns per unit of risk. JJ SNACK FOODS is currently generating about 0.03 per unit of risk. If you would invest  6,003  in Kaiser Aluminum on October 5, 2024 and sell it today you would earn a total of  597.00  from holding Kaiser Aluminum or generate 9.95% return on investment over 90 days.

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

Kaiser Aluminum  vs.  JJ SNACK FOODS

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

JJ SNACK FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JJ SNACK FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, J+J SNACK is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kaiser Aluminum and J+J SNACK

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

The idea behind Kaiser Aluminum and JJ SNACK FOODS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.