Correlation Between J Sainsbury and BM European

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

By analyzing existing cross correlation between J Sainsbury plc and BM European Value, you can compare the effects of market volatilities on J Sainsbury and BM European 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 Sainsbury with a short position of BM European. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Sainsbury and BM European.

Diversification Opportunities for J Sainsbury and BM European

0.75

Correlation Coefficient

J Sainsbury  BM European

Poor diversification

The 3 months correlation between JSNSF and BMRRY is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding J Sainsbury plc and BM European Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM European Value and J Sainsbury 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 Sainsbury plc are associated (or correlated) with BM European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM European Value has no effect on the direction of J Sainsbury i.e., J Sainsbury and BM European go up and down completely randomly.

Pair Corralation between J Sainsbury and BM European

Assuming the 90 days horizon J Sainsbury plc is expected to generate 2.61 times more return on investment than BM European. However, J Sainsbury is 2.61 times more volatile than BM European Value. It trades about 0.05 of its potential returns per unit of risk. BM European Value is currently generating about -0.13 per unit of risk. If you would invest  335.00  in J Sainsbury plc on September 28, 2024 and sell it today you would earn a total of  50.00  from holding J Sainsbury plc or generate 14.93% return on investment over 90 days.

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

J Sainsbury plc  vs.  BM European Value

J Sainsbury plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

BM European Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BM European Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with J Sainsbury and BM European

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

The idea behind J Sainsbury plc and BM European Value 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.