Correlation Between Bread Financial and JBS ON
Can any of the company-specific risk be diversified away by investing in both Bread Financial and JBS ON 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 Bread Financial and JBS ON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and JBS ON NM, you can compare the effects of market volatilities on Bread Financial and JBS ON 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 Bread Financial with a short position of JBS ON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and JBS ON.
Diversification Opportunities for Bread Financial and JBS ON
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bread and JBS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and JBS ON NM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS ON NM and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with JBS ON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS ON NM has no effect on the direction of Bread Financial i.e., Bread Financial and JBS ON go up and down completely randomly.
Pair Corralation between Bread Financial and JBS ON
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.61 times more return on investment than JBS ON. However, Bread Financial is 1.61 times more volatile than JBS ON NM. It trades about 0.05 of its potential returns per unit of risk. JBS ON NM is currently generating about 0.07 per unit of risk. If you would invest 5,160 in Bread Financial Holdings on September 4, 2024 and sell it today you would earn a total of 4,070 from holding Bread Financial Holdings or generate 78.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.77% |
| Values | Daily Returns |
Bread Financial Holdings vs. JBS ON NM
Performance |
| Timeline |
| Bread Financial Holdings |
| JBS ON NM |
Bread Financial and JBS ON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and JBS ON
The main advantage of trading using opposite Bread Financial and JBS ON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, JBS ON 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 JBS ON will offset losses from the drop in JBS ON's long position.The idea behind Bread Financial Holdings and JBS ON NM 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.| JBS ON vs. Marvell Technology | JBS ON vs. Southwest Airlines Co | JBS ON vs. Telecomunicaes Brasileiras SA | JBS ON vs. NXP Semiconductors NV |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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