Correlation Between JAR and DUSK
Can any of the company-specific risk be diversified away by investing in both JAR and DUSK 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 DUSK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAR and DUSK, you can compare the effects of market volatilities on JAR and DUSK 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 DUSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAR and DUSK.
Diversification Opportunities for JAR and DUSK
Weak diversification
The 3 months correlation between JAR and DUSK is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding JAR and DUSK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUSK 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 DUSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUSK has no effect on the direction of JAR i.e., JAR and DUSK go up and down completely randomly.
Pair Corralation between JAR and DUSK
Assuming the 90 days trading horizon JAR is expected to generate 0.52 times more return on investment than DUSK. However, JAR is 1.91 times less risky than DUSK. It trades about -0.02 of its potential returns per unit of risk. DUSK is currently generating about -0.22 per unit of risk. If you would invest 0.38 in JAR on November 1, 2024 and sell it today you would lose (0.01) from holding JAR or give up 2.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
JAR vs. DUSK
Performance |
| Timeline |
| JAR |
| DUSK |
JAR and DUSK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAR and DUSK
The main advantage of trading using opposite JAR and DUSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAR position performs unexpectedly, DUSK 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 DUSK will offset losses from the drop in DUSK's long position.The idea behind JAR and DUSK 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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