Correlation Between Jetblack Corp and Armada Mercantile

Can any of the company-specific risk be diversified away by investing in both Jetblack Corp and Armada Mercantile 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 Jetblack Corp and Armada Mercantile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jetblack Corp and Armada Mercantile, you can compare the effects of market volatilities on Jetblack Corp and Armada Mercantile 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 Jetblack Corp with a short position of Armada Mercantile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jetblack Corp and Armada Mercantile.

Diversification Opportunities for Jetblack Corp and Armada Mercantile

0.11

Correlation Coefficient

Jetblack Corp  Armada Mercantile

Average diversification

The 3 months correlation between Jetblack and Armada is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Jetblack Corp and Armada Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Mercantile and Jetblack Corp 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 Jetblack Corp are associated (or correlated) with Armada Mercantile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Mercantile has no effect on the direction of Jetblack Corp i.e., Jetblack Corp and Armada Mercantile go up and down completely randomly.

Pair Corralation between Jetblack Corp and Armada Mercantile

Given the investment horizon of 90 days Jetblack Corp is expected to generate 2.08 times more return on investment than Armada Mercantile. However, Jetblack Corp is 2.08 times more volatile than Armada Mercantile. It trades about 0.02 of its potential returns per unit of risk. Armada Mercantile is currently generating about -0.05 per unit of risk. If you would invest  0.34  in Jetblack Corp on August 30, 2024 and sell it today you would lose (0.05) from holding Jetblack Corp or give up 14.71% of portfolio value over 90 days.

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

Jetblack Corp  vs.  Armada Mercantile

Jetblack Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jetblack Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Jetblack Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Armada Mercantile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Mercantile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Jetblack Corp and Armada Mercantile

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

The idea behind Jetblack Corp and Armada Mercantile 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .