Correlation Between Jahen Household and Chahua Modern

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

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

Diversification Opportunities for Jahen Household and Chahua Modern

0.92

Correlation Coefficient

Jahen Household  Chahua Modern

Almost no diversification

The 3 months correlation between Jahen and Chahua is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Jahen Household Products and Chahua Modern Housewares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chahua Modern Housewares and Jahen Household 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 Jahen Household Products are associated (or correlated) with Chahua Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chahua Modern Housewares has no effect on the direction of Jahen Household i.e., Jahen Household and Chahua Modern go up and down completely randomly.

Pair Corralation between Jahen Household and Chahua Modern

Assuming the 90 days trading horizon Jahen Household is expected to generate 1.7 times less return on investment than Chahua Modern. But when comparing it to its historical volatility, Jahen Household Products is 1.26 times less risky than Chahua Modern. It trades about 0.15 of its potential returns per unit of risk. Chahua Modern Housewares is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,345  in Chahua Modern Housewares on September 2, 2024 and sell it today you would earn a total of  842.00  from holding Chahua Modern Housewares or generate 62.6% return on investment over 90 days.

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

Jahen Household Products  vs.  Chahua Modern Housewares

Jahen Household Products

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jahen Household Products are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jahen Household sustained solid returns over the last few months and may actually be approaching a breakup point.

Chahua Modern Housewares

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jahen Household and Chahua Modern

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

The idea behind Jahen Household Products and Chahua Modern Housewares 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.