Correlation Between Jupiter and ATP
Can any of the company-specific risk be diversified away by investing in both Jupiter and ATP 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 Jupiter and ATP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jupiter and ATP, you can compare the effects of market volatilities on Jupiter and ATP 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 Jupiter with a short position of ATP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jupiter and ATP.
Diversification Opportunities for Jupiter and ATP
Pay attention - limited upside
The 3 months correlation between Jupiter and ATP is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Jupiter and ATP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATP and Jupiter 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 Jupiter are associated (or correlated) with ATP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATP has no effect on the direction of Jupiter i.e., Jupiter and ATP go up and down completely randomly.
Pair Corralation between Jupiter and ATP
Assuming the 90 days trading horizon Jupiter is expected to generate 2.06 times less return on investment than ATP. But when comparing it to its historical volatility, Jupiter is 3.02 times less risky than ATP. It trades about 0.08 of its potential returns per unit of risk. ATP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.01 in ATP on August 27, 2024 and sell it today you would lose 0.00 from holding ATP or give up 58.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 69.95% |
| Values | Daily Returns |
Jupiter vs. ATP
Performance |
| Timeline |
| Jupiter |
| ATP |
Jupiter and ATP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jupiter and ATP
The main advantage of trading using opposite Jupiter and ATP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jupiter position performs unexpectedly, ATP 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 ATP will offset losses from the drop in ATP's long position.The idea behind Jupiter and ATP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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