Correlation Between Repco Home and JM Financial

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

By analyzing existing cross correlation between Repco Home Finance and JM Financial Limited, you can compare the effects of market volatilities on Repco Home and JM Financial 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 Repco Home with a short position of JM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repco Home and JM Financial.

Diversification Opportunities for Repco Home and JM Financial

0.14

Correlation Coefficient

Repco Home  JM Financial

Average diversification

The 3 months correlation between Repco and JMFINANCIL is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Repco Home 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 Repco Home Finance are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Repco Home i.e., Repco Home and JM Financial go up and down completely randomly.

Pair Corralation between Repco Home and JM Financial

Assuming the 90 days trading horizon Repco Home Finance is expected to under-perform the JM Financial. But the stock apears to be less risky and, when comparing its historical volatility, Repco Home Finance is 1.57 times less risky than JM Financial. The stock trades about -0.15 of its potential returns per unit of risk. The JM Financial Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12,623  in JM Financial Limited on September 20, 2024 and sell it today you would earn a total of  903.00  from holding JM Financial Limited or generate 7.15% return on investment over 90 days.

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

Repco Home Finance  vs.  JM Financial Limited

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

JM Financial Limited

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, JM Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Repco Home and JM Financial

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

The idea behind Repco Home Finance and JM Financial Limited 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.