Correlation Between JB Hi and Bravura Solutions

Can any of the company-specific risk be diversified away by investing in both JB Hi and Bravura Solutions 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 JB Hi and Bravura Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JB Hi Fi and Bravura Solutions, you can compare the effects of market volatilities on JB Hi and Bravura Solutions 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 JB Hi with a short position of Bravura Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Hi and Bravura Solutions.

Diversification Opportunities for JB Hi and Bravura Solutions

0.79

Correlation Coefficient

JB Hi  Bravura Solutions

Poor diversification

The 3 months correlation between JBH and Bravura is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding JB Hi Fi and Bravura Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravura Solutions and JB Hi 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 JB Hi Fi are associated (or correlated) with Bravura Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravura Solutions has no effect on the direction of JB Hi i.e., JB Hi and Bravura Solutions go up and down completely randomly.

Pair Corralation between JB Hi and Bravura Solutions

Assuming the 90 days trading horizon JB Hi is expected to generate 19.22 times less return on investment than Bravura Solutions. But when comparing it to its historical volatility, JB Hi Fi is 4.14 times less risky than Bravura Solutions. It trades about 0.07 of its potential returns per unit of risk. Bravura Solutions is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Bravura Solutions on September 24, 2024 and sell it today you would earn a total of  55.00  from holding Bravura Solutions or generate 35.95% return on investment over 90 days.

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

JB Hi Fi  vs.  Bravura Solutions

JB Hi Fi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hi Fi are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, JB Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bravura Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JB Hi and Bravura Solutions

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

The idea behind JB Hi Fi and Bravura Solutions 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..