Correlation Between Flagship Investments and Judo Capital
Can any of the company-specific risk be diversified away by investing in both Flagship Investments and Judo Capital 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 Flagship Investments and Judo Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flagship Investments and Judo Capital Holdings, you can compare the effects of market volatilities on Flagship Investments and Judo Capital 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 Flagship Investments with a short position of Judo Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flagship Investments and Judo Capital.
Diversification Opportunities for Flagship Investments and Judo Capital
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Flagship and Judo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Flagship Investments and Judo Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Judo Capital Holdings and Flagship Investments 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 Flagship Investments are associated (or correlated) with Judo Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Judo Capital Holdings has no effect on the direction of Flagship Investments i.e., Flagship Investments and Judo Capital go up and down completely randomly.
Pair Corralation between Flagship Investments and Judo Capital
Assuming the 90 days trading horizon Flagship Investments is expected to generate 1.92 times less return on investment than Judo Capital. But when comparing it to its historical volatility, Flagship Investments is 2.01 times less risky than Judo Capital. It trades about 0.06 of its potential returns per unit of risk. Judo Capital Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 125.00 in Judo Capital Holdings on September 12, 2024 and sell it today you would earn a total of 66.00 from holding Judo Capital Holdings or generate 52.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flagship Investments vs. Judo Capital Holdings
Performance |
| Timeline |
| Flagship Investments |
| Judo Capital Holdings |
Flagship Investments and Judo Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flagship Investments and Judo Capital
The main advantage of trading using opposite Flagship Investments and Judo Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flagship Investments position performs unexpectedly, Judo Capital 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 Judo Capital will offset losses from the drop in Judo Capital's long position.| Flagship Investments vs. MetalsGrove Mining | Flagship Investments vs. Perseus Mining | Flagship Investments vs. Retail Food Group | Flagship Investments vs. Infomedia |
| Judo Capital vs. Premier Investments | Judo Capital vs. Flagship Investments | Judo Capital vs. Microequities Asset Management | Judo Capital vs. Infomedia |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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