Correlation Between J+J SNACK and INTER CARS

Can any of the company-specific risk be diversified away by investing in both J+J SNACK and INTER CARS 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 J+J SNACK and INTER CARS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JJ SNACK FOODS and INTER CARS SA, you can compare the effects of market volatilities on J+J SNACK and INTER CARS 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 J+J SNACK with a short position of INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of J+J SNACK and INTER CARS.

Diversification Opportunities for J+J SNACK and INTER CARS

0.05

Correlation Coefficient

J+J SNACK  INTER CARS

Significant diversification

The 3 months correlation between J+J and INTER is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA and J+J SNACK 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 JJ SNACK FOODS are associated (or correlated) with INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of J+J SNACK i.e., J+J SNACK and INTER CARS go up and down completely randomly.

Pair Corralation between J+J SNACK and INTER CARS

Assuming the 90 days trading horizon J+J SNACK is expected to generate 2.2 times less return on investment than INTER CARS. But when comparing it to its historical volatility, JJ SNACK FOODS is 1.75 times less risky than INTER CARS. It trades about 0.02 of its potential returns per unit of risk. INTER CARS SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,545  in INTER CARS SA on September 29, 2024 and sell it today you would earn a total of  2,135  from holding INTER CARS SA or generate 22.37% return on investment over 90 days.

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

JJ SNACK FOODS  vs.  INTER CARS SA

JJ SNACK FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JJ SNACK FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, J+J SNACK is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

INTER CARS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTER CARS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with J+J SNACK and INTER CARS

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

The idea behind JJ SNACK FOODS and INTER CARS SA 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.