Correlation Between Event Hospitality and Jazz Pharmaceuticals

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

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

Diversification Opportunities for Event Hospitality and Jazz Pharmaceuticals

0.81

Correlation Coefficient

Event Hospitality  Jazz Pharmaceuticals

Very poor diversification

The 3 months correlation between Event and Jazz is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Event Hospitality and and Jazz Pharmaceuticals plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jazz Pharmaceuticals plc and Event Hospitality 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 Event Hospitality and are associated (or correlated) with Jazz Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jazz Pharmaceuticals plc has no effect on the direction of Event Hospitality i.e., Event Hospitality and Jazz Pharmaceuticals go up and down completely randomly.

Pair Corralation between Event Hospitality and Jazz Pharmaceuticals

Assuming the 90 days trading horizon Event Hospitality is expected to generate 3.07 times less return on investment than Jazz Pharmaceuticals. But when comparing it to its historical volatility, Event Hospitality and is 1.27 times less risky than Jazz Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Jazz Pharmaceuticals plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,782  in Jazz Pharmaceuticals plc on September 23, 2024 and sell it today you would earn a total of  1,903  from holding Jazz Pharmaceuticals plc or generate 19.45% return on investment over 90 days.

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

Event Hospitality and  vs.  Jazz Pharmaceuticals plc

Event Hospitality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Event Hospitality is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Jazz Pharmaceuticals plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jazz Pharmaceuticals plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jazz Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Event Hospitality and Jazz Pharmaceuticals

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

The idea behind Event Hospitality and and Jazz Pharmaceuticals plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.