Correlation Between KEY and JNT
Can any of the company-specific risk be diversified away by investing in both KEY and JNT 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 KEY and JNT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KEY and JNT, you can compare the effects of market volatilities on KEY and JNT 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 KEY with a short position of JNT. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEY and JNT.
Diversification Opportunities for KEY and JNT
Very good diversification
The 3 months correlation between KEY and JNT is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KEY and JNT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JNT and KEY 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 KEY are associated (or correlated) with JNT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JNT has no effect on the direction of KEY i.e., KEY and JNT go up and down completely randomly.
Pair Corralation between KEY and JNT
Assuming the 90 days trading horizon KEY is expected to generate 3.74 times more return on investment than JNT. However, KEY is 3.74 times more volatile than JNT. It trades about 0.04 of its potential returns per unit of risk. JNT is currently generating about 0.13 per unit of risk. If you would invest 0.37 in KEY on August 25, 2024 and sell it today you would lose (0.03) from holding KEY or give up 7.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 55.33% |
| Values | Daily Returns |
KEY vs. JNT
Performance |
| Timeline |
| KEY |
| JNT |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
KEY and JNT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KEY and JNT
The main advantage of trading using opposite KEY and JNT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEY position performs unexpectedly, JNT 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 JNT will offset losses from the drop in JNT's long position.The idea behind KEY and JNT 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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