Correlation Between KARRAT and JAR
Can any of the company-specific risk be diversified away by investing in both KARRAT and JAR 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 KARRAT and JAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KARRAT and JAR, you can compare the effects of market volatilities on KARRAT and JAR 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 KARRAT with a short position of JAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of KARRAT and JAR.
Diversification Opportunities for KARRAT and JAR
Very weak diversification
The 3 months correlation between KARRAT and JAR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KARRAT and JAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAR and KARRAT 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 KARRAT are associated (or correlated) with JAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAR has no effect on the direction of KARRAT i.e., KARRAT and JAR go up and down completely randomly.
Pair Corralation between KARRAT and JAR
Assuming the 90 days trading horizon KARRAT is expected to generate 8.75 times less return on investment than JAR. In addition to that, KARRAT is 1.34 times more volatile than JAR. It trades about 0.01 of its total potential returns per unit of risk. JAR is currently generating about 0.07 per unit of volatility. If you would invest 0.14 in JAR on August 25, 2024 and sell it today you would earn a total of 0.21 from holding JAR or generate 153.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 45.0% |
| Values | Daily Returns |
KARRAT vs. JAR
Performance |
| Timeline |
| KARRAT |
| JAR |
KARRAT and JAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KARRAT and JAR
The main advantage of trading using opposite KARRAT and JAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KARRAT position performs unexpectedly, JAR 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 JAR will offset losses from the drop in JAR's long position.The idea behind KARRAT and JAR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |