Correlation Between Organic Meat and JS Investments

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

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

Diversification Opportunities for Organic Meat and JS Investments

0.27

Correlation Coefficient

Organic Meat  JS Investments

Modest diversification

The 3 months correlation between Organic and JSIL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Organic Meat and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments and Organic Meat 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 The Organic Meat 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 Organic Meat i.e., Organic Meat and JS Investments go up and down completely randomly.

Pair Corralation between Organic Meat and JS Investments

Assuming the 90 days trading horizon The Organic Meat is expected to generate 0.59 times more return on investment than JS Investments. However, The Organic Meat is 1.68 times less risky than JS Investments. It trades about -0.03 of its potential returns per unit of risk. JS Investments is currently generating about -0.02 per unit of risk. If you would invest  3,565  in The Organic Meat on December 29, 2024 and sell it today you would lose (166.00) from holding The Organic Meat or give up 4.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

The Organic Meat  vs.  JS Investments

Organic Meat

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Organic Meat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Organic Meat is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

JS Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days JS Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JS Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Organic Meat and JS Investments

The main advantage of trading using opposite Organic Meat and JS Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Organic Meat 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 The Organic Meat 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.