Correlation Between Unity Foods and JS Bank

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

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

Diversification Opportunities for Unity Foods and JS Bank

0.41

Correlation Coefficient

Unity Foods  JS Bank

Very weak diversification

The 3 months correlation between Unity and JSBL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Unity Foods and JS Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Bank and Unity Foods 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 Unity Foods are associated (or correlated) with JS Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Bank has no effect on the direction of Unity Foods i.e., Unity Foods and JS Bank go up and down completely randomly.

Pair Corralation between Unity Foods and JS Bank

Assuming the 90 days trading horizon Unity Foods is expected to generate 1.01 times less return on investment than JS Bank. But when comparing it to its historical volatility, Unity Foods is 1.14 times less risky than JS Bank. It trades about 0.16 of its potential returns per unit of risk. JS Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  851.00  in JS Bank on October 24, 2024 and sell it today you would earn a total of  239.00  from holding JS Bank or generate 28.08% return on investment over 90 days.

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

Unity Foods  vs.  JS Bank

Unity Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Unity Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

JS Bank

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JS Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Foods and JS Bank

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

The idea behind Unity Foods and JS Bank 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.