Correlation Between Basic Materials and JBS SA
Can any of the company-specific risk be diversified away by investing in both Basic Materials and JBS SA 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 Basic Materials and JBS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and JBS SA, you can compare the effects of market volatilities on Basic Materials and JBS SA 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 Basic Materials with a short position of JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and JBS SA.
Diversification Opportunities for Basic Materials and JBS SA
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and JBS is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA and Basic Materials 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 Basic Materials are associated (or correlated) with JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of Basic Materials i.e., Basic Materials and JBS SA go up and down completely randomly.
Pair Corralation between Basic Materials and JBS SA
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.69 times more return on investment than JBS SA. However, Basic Materials is 1.44 times less risky than JBS SA. It trades about 0.01 of its potential returns per unit of risk. JBS SA is currently generating about -0.02 per unit of risk. If you would invest 573,364 in Basic Materials on February 3, 2024 and sell it today you would earn a total of 15,595 from holding Basic Materials or generate 2.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Basic Materials vs. JBS SA
Performance |
Timeline |
Basic Materials and JBS SA Volatility Contrast
Predicted Return Density |
Returns |
Basic Materials
Pair trading matchups for Basic Materials
JBS SA
Pair trading matchups for JBS SA
Pair Trading with Basic Materials and JBS SA
The main advantage of trading using opposite Basic Materials and JBS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, JBS SA 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 JBS SA will offset losses from the drop in JBS SA's long position.Basic Materials vs. CM Hospitalar SA | Basic Materials vs. Spotify Technology SA | Basic Materials vs. Marvell Technology | Basic Materials vs. G2D Investments |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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