Correlation Between Embassy Office and JTL Industries

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

By analyzing existing cross correlation between Embassy Office Parks and JTL Industries, you can compare the effects of market volatilities on Embassy Office and JTL Industries 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 Embassy Office with a short position of JTL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embassy Office and JTL Industries.

Diversification Opportunities for Embassy Office and JTL Industries

0.51

Correlation Coefficient

Embassy Office  JTL Industries

Very weak diversification

The 3 months correlation between Embassy and JTL is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Office Parks and JTL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JTL Industries and Embassy Office 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 Embassy Office Parks are associated (or correlated) with JTL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JTL Industries has no effect on the direction of Embassy Office i.e., Embassy Office and JTL Industries go up and down completely randomly.

Pair Corralation between Embassy Office and JTL Industries

Assuming the 90 days trading horizon Embassy Office Parks is expected to generate 0.15 times more return on investment than JTL Industries. However, Embassy Office Parks is 6.89 times less risky than JTL Industries. It trades about -0.05 of its potential returns per unit of risk. JTL Industries is currently generating about -0.14 per unit of risk. If you would invest  38,550  in Embassy Office Parks on August 31, 2024 and sell it today you would lose (1,312) from holding Embassy Office Parks or give up 3.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Embassy Office Parks  vs.  JTL Industries

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

JTL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JTL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Embassy Office and JTL Industries

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

The idea behind Embassy Office Parks and JTL Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.