Correlation Between National Foods and JS Investments
Can any of the company-specific risk be diversified away by investing in both National Foods and JS Investments 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 National Foods and JS Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and JS Investments, you can compare the effects of market volatilities on National Foods and JS Investments 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 National Foods with a short position of JS Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and JS Investments.
Diversification Opportunities for National Foods and JS Investments
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and JSIL is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments and National Foods 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 National Foods are associated (or correlated) with JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of National Foods i.e., National Foods and JS Investments go up and down completely randomly.
Pair Corralation between National Foods and JS Investments
Assuming the 90 days trading horizon National Foods is expected to under-perform the JS Investments. But the stock apears to be less risky and, when comparing its historical volatility, National Foods is 2.05 times less risky than JS Investments. The stock trades about -0.02 of its potential returns per unit of risk. The JS Investments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,200 in JS Investments on August 28, 2024 and sell it today you would earn a total of 5.00 from holding JS Investments or generate 0.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. JS Investments
Performance |
| Timeline |
| National Foods |
| JS Investments |
National Foods and JS Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and JS Investments
The main advantage of trading using opposite National Foods and JS Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, JS Investments 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 JS Investments will offset losses from the drop in JS Investments' long position.| National Foods vs. Matco Foods | National Foods vs. Pakistan Aluminium Beverage | National Foods vs. Crescent Star Insurance | National Foods vs. Unity Foods |
| JS Investments vs. Askari Bank | JS Investments vs. Orient Rental Modaraba | JS Investments vs. Shaheen Insurance | JS Investments vs. United Insurance |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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