Correlation Between Cambridge Technology and JM Financial

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

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

Diversification Opportunities for Cambridge Technology and JM Financial

0.3

Correlation Coefficient

Cambridge Technology  JM Financial

Weak diversification

The 3 months correlation between Cambridge and JMFINANCIL is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Cambridge Technology 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 Cambridge Technology Enterprises are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Cambridge Technology i.e., Cambridge Technology and JM Financial go up and down completely randomly.

Pair Corralation between Cambridge Technology and JM Financial

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 1.04 times more return on investment than JM Financial. However, Cambridge Technology is 1.04 times more volatile than JM Financial Limited. It trades about -0.04 of its potential returns per unit of risk. JM Financial Limited is currently generating about -0.1 per unit of risk. If you would invest  10,874  in Cambridge Technology Enterprises on September 28, 2024 and sell it today you would lose (916.00) from holding Cambridge Technology Enterprises or give up 8.42% of portfolio value over 90 days.

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

Cambridge Technology Enterpris  vs.  JM Financial Limited

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

JM Financial Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cambridge Technology and JM Financial

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

The idea behind Cambridge Technology Enterprises and JM Financial Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.