Correlation Between Stella Jones and Exchange Income

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

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

Diversification Opportunities for Stella Jones and Exchange Income

0.6

Correlation Coefficient

Stella Jones  Exchange Income

Poor diversification

The 3 months correlation between Stella and Exchange is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Exchange Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Income and Stella Jones 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 Stella Jones are associated (or correlated) with Exchange Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Income has no effect on the direction of Stella Jones i.e., Stella Jones and Exchange Income go up and down completely randomly.

Pair Corralation between Stella Jones and Exchange Income

Assuming the 90 days horizon Stella Jones is expected to generate 1.53 times more return on investment than Exchange Income. However, Stella Jones is 1.53 times more volatile than Exchange Income. It trades about -0.02 of its potential returns per unit of risk. Exchange Income is currently generating about -0.18 per unit of risk. If you would invest  7,068  in Stella Jones on December 30, 2024 and sell it today you would lose (293.00) from holding Stella Jones or give up 4.15% of portfolio value over 90 days.

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

Stella Jones  vs.  Exchange Income

Stella Jones

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stella Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Stella Jones is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Exchange Income

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Stella Jones and Exchange Income

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

The idea behind Stella Jones and Exchange Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.