Correlation Between JAR and AEON
Can any of the company-specific risk be diversified away by investing in both JAR and AEON 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 JAR and AEON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAR and AEON, you can compare the effects of market volatilities on JAR and AEON 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 JAR with a short position of AEON. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAR and AEON.
Diversification Opportunities for JAR and AEON
Almost no diversification
The 3 months correlation between JAR and AEON is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding JAR and AEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON and JAR 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 JAR are associated (or correlated) with AEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON has no effect on the direction of JAR i.e., JAR and AEON go up and down completely randomly.
Pair Corralation between JAR and AEON
Assuming the 90 days trading horizon JAR is expected to generate 1.5 times less return on investment than AEON. In addition to that, JAR is 1.09 times more volatile than AEON. It trades about 0.21 of its total potential returns per unit of risk. AEON is currently generating about 0.35 per unit of volatility. If you would invest 17.00 in AEON on August 23, 2024 and sell it today you would earn a total of 7.00 from holding AEON or generate 41.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAR vs. AEON
Performance |
| Timeline |
| JAR |
| AEON |
JAR and AEON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAR and AEON
The main advantage of trading using opposite JAR and AEON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAR position performs unexpectedly, AEON 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 AEON will offset losses from the drop in AEON's long position.The idea behind JAR and AEON 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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