Correlation Between JAR and REDLANG
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By analyzing existing cross correlation between JAR and REDLANG, you can compare the effects of market volatilities on JAR and REDLANG 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 REDLANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAR and REDLANG.
Diversification Opportunities for JAR and REDLANG
Poor diversification
The 3 months correlation between JAR and REDLANG is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding JAR and REDLANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDLANG 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 REDLANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDLANG has no effect on the direction of JAR i.e., JAR and REDLANG go up and down completely randomly.
Pair Corralation between JAR and REDLANG
Assuming the 90 days trading horizon JAR is expected to generate 1.29 times less return on investment than REDLANG. But when comparing it to its historical volatility, JAR is 1.13 times less risky than REDLANG. It trades about 0.19 of its potential returns per unit of risk. REDLANG is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 0.09 in REDLANG on September 4, 2024 and sell it today you would earn a total of 0.03 from holding REDLANG or generate 28.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAR vs. REDLANG
Performance |
| Timeline |
| JAR |
| REDLANG |
JAR and REDLANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAR and REDLANG
The main advantage of trading using opposite JAR and REDLANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAR position performs unexpectedly, REDLANG 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 REDLANG will offset losses from the drop in REDLANG's long position.The idea behind JAR and REDLANG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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