Correlation Between Le Travenues and JM Financial

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

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

Diversification Opportunities for Le Travenues and JM Financial

0.59

Correlation Coefficient

Le Travenues  JM Financial

Very weak diversification

The 3 months correlation between IXIGO and JMFINANCIL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Le Travenues Technology 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 Le Travenues 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 Le Travenues Technology 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 Le Travenues i.e., Le Travenues and JM Financial go up and down completely randomly.

Pair Corralation between Le Travenues and JM Financial

Assuming the 90 days trading horizon Le Travenues is expected to generate 2.05 times less return on investment than JM Financial. But when comparing it to its historical volatility, Le Travenues Technology is 1.14 times less risky than JM Financial. It trades about 0.04 of its potential returns per unit of risk. JM Financial Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12,229  in JM Financial Limited on September 19, 2024 and sell it today you would earn a total of  1,571  from holding JM Financial Limited or generate 12.85% return on investment over 90 days.

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

Le Travenues Technology  vs.  JM Financial Limited

Le Travenues Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Le Travenues Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Le Travenues may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JM Financial Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Le Travenues and JM Financial

The main advantage of trading using opposite Le Travenues and JM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Le Travenues 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 Le Travenues Technology 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.