Correlation Between J+J SNACK and First American
Can any of the company-specific risk be diversified away by investing in both J+J SNACK and First American 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 J+J SNACK and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JJ SNACK FOODS and First American Financial, you can compare the effects of market volatilities on J+J SNACK and First American 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 J+J SNACK with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of J+J SNACK and First American.
Diversification Opportunities for J+J SNACK and First American
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between J+J and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS and First American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Financial and J+J SNACK 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 JJ SNACK FOODS are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Financial has no effect on the direction of J+J SNACK i.e., J+J SNACK and First American go up and down completely randomly.
Pair Corralation between J+J SNACK and First American
Assuming the 90 days trading horizon JJ SNACK FOODS is expected to generate 0.7 times more return on investment than First American. However, JJ SNACK FOODS is 1.44 times less risky than First American. It trades about -0.38 of its potential returns per unit of risk. First American Financial is currently generating about -0.32 per unit of risk. If you would invest 16,222 in JJ SNACK FOODS on October 1, 2024 and sell it today you would lose (1,022) from holding JJ SNACK FOODS or give up 6.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JJ SNACK FOODS vs. First American Financial
Performance |
| Timeline |
| JJ SNACK FOODS |
| First American Financial |
J+J SNACK and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with J+J SNACK and First American
The main advantage of trading using opposite J+J SNACK and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J+J SNACK position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| J+J SNACK vs. Mowi ASA | J+J SNACK vs. LEROY SEAFOOD GRUNSPADR | J+J SNACK vs. Lery Seafood Group | J+J SNACK vs. Nisshin Seifun Group |
| First American vs. nib holdings limited | First American vs. Trisura Group | First American vs. EMPLOYERS HLDGS DL |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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