Correlation Between Repco Home and JM Financial

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Can any of the company-specific risk be diversified away by investing in both Repco Home and JM Financial 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 Repco Home and JM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Repco Home Finance and JM Financial Limited, you can compare the effects of market volatilities on Repco Home and JM Financial 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 Repco Home with a short position of JM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repco Home and JM Financial.

Diversification Opportunities for Repco Home and JM Financial

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Repco and JMFINANCIL is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Repco Home 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 Repco Home Finance are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Repco Home i.e., Repco Home and JM Financial go up and down completely randomly.

Pair Corralation between Repco Home and JM Financial

Assuming the 90 days trading horizon Repco Home is expected to generate 1.02 times less return on investment than JM Financial. In addition to that, Repco Home is 1.01 times more volatile than JM Financial Limited. It trades about 0.06 of its total potential returns per unit of risk. JM Financial Limited is currently generating about 0.06 per unit of volatility. If you would invest  6,872  in JM Financial Limited on September 20, 2024 and sell it today you would earn a total of  6,654  from holding JM Financial Limited or generate 96.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Repco Home Finance  vs.  JM Financial Limited

 Performance 
       Timeline  
Repco Home Finance 

Risk-Adjusted Performance

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Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JM Financial Limited 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, JM Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Repco Home and JM Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Repco Home and JM Financial

The main advantage of trading using opposite Repco Home and JM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repco Home position performs unexpectedly, JM Financial 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 JM Financial will offset losses from the drop in JM Financial's long position.
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The idea behind Repco Home Finance and JM Financial Limited 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.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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