Correlation Between JJill and Cato
Can any of the company-specific risk be diversified away by investing in both JJill and Cato 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 JJill and Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JJill Inc and Cato Corporation, you can compare the effects of market volatilities on JJill and Cato 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 JJill with a short position of Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of JJill and Cato.
Diversification Opportunities for JJill and Cato
Very good diversification
The 3 months correlation between JJill and Cato is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding JJill Inc and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato and JJill 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 JJill Inc are associated (or correlated) with Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of JJill i.e., JJill and Cato go up and down completely randomly.
Pair Corralation between JJill and Cato
Given the investment horizon of 90 days JJill Inc is expected to generate 1.16 times more return on investment than Cato. However, JJill is 1.16 times more volatile than Cato Corporation. It trades about 0.02 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.03 per unit of risk. If you would invest 2,463 in JJill Inc on August 23, 2024 and sell it today you would earn a total of 70.00 from holding JJill Inc or generate 2.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JJill Inc vs. Cato Corp.
Performance |
| Timeline |
| JJill Inc |
| Cato |
JJill and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JJill and Cato
The main advantage of trading using opposite JJill and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JJill position performs unexpectedly, Cato 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 Cato will offset losses from the drop in Cato's long position.The idea behind JJill Inc and Cato Corporation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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