Correlation Between Loads and JS Investments

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

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

Diversification Opportunities for Loads and JS Investments

0.65

Correlation Coefficient

Loads  JS Investments

Poor diversification

The 3 months correlation between Loads and JSIL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Loads and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments and Loads 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 Loads are associated (or correlated) with JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of Loads i.e., Loads and JS Investments go up and down completely randomly.

Pair Corralation between Loads and JS Investments

Assuming the 90 days trading horizon Loads is expected to generate 0.88 times more return on investment than JS Investments. However, Loads is 1.13 times less risky than JS Investments. It trades about 0.21 of its potential returns per unit of risk. JS Investments is currently generating about 0.05 per unit of risk. If you would invest  1,028  in Loads on September 14, 2024 and sell it today you would earn a total of  527.00  from holding Loads or generate 51.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Loads  vs.  JS Investments

Loads

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

JS Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Loads and JS Investments

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

The idea behind Loads and JS Investments 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.