Correlation Between Asian Insulators and JRW Utility

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

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

Diversification Opportunities for Asian Insulators and JRW Utility

0.88

Correlation Coefficient

Asian Insulators  JRW Utility

Very poor diversification

The 3 months correlation between Asian and JRW is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Asian Insulators PCL and JRW Utility Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JRW Utility Public and Asian Insulators 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 Asian Insulators PCL are associated (or correlated) with JRW Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JRW Utility Public has no effect on the direction of Asian Insulators i.e., Asian Insulators and JRW Utility go up and down completely randomly.

Pair Corralation between Asian Insulators and JRW Utility

Assuming the 90 days horizon Asian Insulators PCL is expected to generate 0.59 times more return on investment than JRW Utility. However, Asian Insulators PCL is 1.69 times less risky than JRW Utility. It trades about -0.24 of its potential returns per unit of risk. JRW Utility Public is currently generating about -0.57 per unit of risk. If you would invest  374.00  in Asian Insulators PCL on September 15, 2024 and sell it today you would lose (18.00) from holding Asian Insulators PCL or give up 4.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Asian Insulators PCL  vs.  JRW Utility Public

Asian Insulators PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Insulators PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

JRW Utility Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JRW Utility Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Asian Insulators and JRW Utility

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

The idea behind Asian Insulators PCL and JRW Utility Public 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.