Correlation Between Perpetual Credit and JB Hi-Fi

Can any of the company-specific risk be diversified away by investing in both Perpetual Credit and JB Hi-Fi 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 Perpetual Credit and JB Hi-Fi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perpetual Credit Income and JB Hi Fi, you can compare the effects of market volatilities on Perpetual Credit and JB Hi-Fi 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 Perpetual Credit with a short position of JB Hi-Fi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perpetual Credit and JB Hi-Fi.

Diversification Opportunities for Perpetual Credit and JB Hi-Fi

0.18

Correlation Coefficient

Perpetual Credit  JB Hi-Fi

Average diversification

The 3 months correlation between Perpetual and JBH is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Perpetual Credit Income and JB Hi Fi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hi Fi and Perpetual Credit 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 Perpetual Credit Income are associated (or correlated) with JB Hi-Fi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hi Fi has no effect on the direction of Perpetual Credit i.e., Perpetual Credit and JB Hi-Fi go up and down completely randomly.

Pair Corralation between Perpetual Credit and JB Hi-Fi

Assuming the 90 days trading horizon Perpetual Credit is expected to generate 1.17 times less return on investment than JB Hi-Fi. But when comparing it to its historical volatility, Perpetual Credit Income is 1.29 times less risky than JB Hi-Fi. It trades about 0.01 of its potential returns per unit of risk. JB Hi Fi is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,492  in JB Hi Fi on December 29, 2024 and sell it today you would lose (25.00) from holding JB Hi Fi or give up 0.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Perpetual Credit Income  vs.  JB Hi Fi

Perpetual Credit Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perpetual Credit Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Perpetual Credit is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

JB Hi Fi

Risk-Adjusted Performance

Very Weak

Over the last 90 days JB Hi Fi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, JB Hi-Fi 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 Perpetual Credit and JB Hi-Fi

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

The idea behind Perpetual Credit Income and JB Hi Fi 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.