Correlation Between J Long and Williams Sonoma

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

By analyzing existing cross correlation between J Long Group Limited and Williams Sonoma, you can compare the effects of market volatilities on J Long and Williams Sonoma 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 Long with a short position of Williams Sonoma. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Long and Williams Sonoma.

Diversification Opportunities for J Long and Williams Sonoma

-0.54

Correlation Coefficient

J Long  Williams Sonoma

Excellent diversification

The 3 months correlation between J Long and Williams is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding J Long Group Limited and Williams Sonoma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Sonoma and J Long 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 J Long Group Limited are associated (or correlated) with Williams Sonoma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Sonoma has no effect on the direction of J Long i.e., J Long and Williams Sonoma go up and down completely randomly.

Pair Corralation between J Long and Williams Sonoma

Allowing for the 90-day total investment horizon J Long is expected to generate 6.63 times less return on investment than Williams Sonoma. In addition to that, J Long is 3.04 times more volatile than Williams Sonoma. It trades about 0.01 of its total potential returns per unit of risk. Williams Sonoma is currently generating about 0.13 per unit of volatility. If you would invest  13,060  in Williams Sonoma on September 1, 2024 and sell it today you would earn a total of  4,142  from holding Williams Sonoma or generate 31.72% return on investment over 90 days.

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

J Long Group Limited  vs.  Williams Sonoma

J Long Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Long Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, J Long is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Williams Sonoma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with J Long and Williams Sonoma

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

The idea behind J Long Group Limited and Williams Sonoma 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.