Correlation Between Buckle and JJill
Can any of the company-specific risk be diversified away by investing in both Buckle and JJill 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 Buckle and JJill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Buckle Inc and JJill Inc, you can compare the effects of market volatilities on Buckle and JJill 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 Buckle with a short position of JJill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buckle and JJill.
Diversification Opportunities for Buckle and JJill
Almost no diversification
The 3 months correlation between Buckle and JJill is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Buckle Inc and JJill Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJill Inc and Buckle 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 Buckle Inc are associated (or correlated) with JJill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJill Inc has no effect on the direction of Buckle i.e., Buckle and JJill go up and down completely randomly.
Pair Corralation between Buckle and JJill
Considering the 90-day investment horizon Buckle Inc is expected to generate 0.68 times more return on investment than JJill. However, Buckle Inc is 1.48 times less risky than JJill. It trades about 0.04 of its potential returns per unit of risk. JJill Inc is currently generating about 0.02 per unit of risk. If you would invest 3,616 in Buckle Inc on October 20, 2024 and sell it today you would earn a total of 1,225 from holding Buckle Inc or generate 33.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Buckle Inc vs. JJill Inc
Performance |
| Timeline |
| Buckle Inc |
| JJill Inc |
Buckle and JJill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Buckle and JJill
The main advantage of trading using opposite Buckle and JJill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buckle position performs unexpectedly, JJill 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 JJill will offset losses from the drop in JJill's long position.The idea behind Buckle Inc and JJill Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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