Correlation Between JAR and Venus

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

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

Diversification Opportunities for JAR and Venus

0.58

Correlation Coefficient

JAR  Venus

Very weak diversification

The 3 months correlation between JAR and Venus is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding JAR and Venus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Venus 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 Venus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Venus has no effect on the direction of JAR i.e., JAR and Venus go up and down completely randomly.

Pair Corralation between JAR and Venus

Assuming the 90 days trading horizon JAR is expected to generate 0.52 times more return on investment than Venus. However, JAR is 1.94 times less risky than Venus. It trades about -0.26 of its potential returns per unit of risk. Venus is currently generating about -0.23 per unit of risk. If you would invest  0.28  in JAR on January 28, 2024 and sell it today you would lose (0.06) from holding JAR or give up 21.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

JAR  vs.  Venus

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.

Venus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Venus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Venus 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 Venus

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

The idea behind JAR and Venus 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.