Correlation Between JAR and RHOC

Can any of the company-specific risk be diversified away by investing in both JAR and RHOC 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 JAR and RHOC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JAR and RHOC, you can compare the effects of market volatilities on JAR and RHOC 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 JAR with a short position of RHOC. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAR and RHOC.

Diversification Opportunities for JAR and RHOC

-0.07

Correlation Coefficient

JAR  RHOC

Good diversification

The 3 months correlation between JAR and RHOC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding JAR and RHOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RHOC and JAR 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 JAR are associated (or correlated) with RHOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RHOC has no effect on the direction of JAR i.e., JAR and RHOC go up and down completely randomly.

Pair Corralation between JAR and RHOC

Assuming the 90 days trading horizon JAR is expected to generate 41.8 times less return on investment than RHOC. But when comparing it to its historical volatility, JAR is 10.1 times less risky than RHOC. It trades about 0.02 of its potential returns per unit of risk. RHOC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.00  in RHOC on January 29, 2024 and sell it today you would earn a total of  21.00  from holding RHOC or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.34%
Values	Daily Returns

JAR  vs.  RHOC

JAR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JAR exhibited solid returns over the last few months and may actually be approaching a breakup point.

RHOC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RHOC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, RHOC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JAR and RHOC

The main advantage of trading using opposite JAR and RHOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAR position performs unexpectedly, RHOC 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 RHOC will offset losses from the drop in RHOC's long position.

The idea behind JAR and RHOC 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..