Correlation Between Jupiter and COV

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

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

Diversification Opportunities for Jupiter and COV

0.86

Correlation Coefficient

Jupiter  COV

Very poor diversification

The 3 months correlation between Jupiter and COV is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Jupiter and COV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COV and Jupiter 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 Jupiter are associated (or correlated) with COV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COV has no effect on the direction of Jupiter i.e., Jupiter and COV go up and down completely randomly.

Pair Corralation between Jupiter and COV

Assuming the 90 days trading horizon Jupiter is expected to generate 1.03 times less return on investment than COV. In addition to that, Jupiter is 1.43 times more volatile than COV. It trades about 0.15 of its total potential returns per unit of risk. COV is currently generating about 0.22 per unit of volatility. If you would invest  22.00  in COV on August 30, 2024 and sell it today you would earn a total of  14.00  from holding COV or generate 63.64% return on investment over 90 days.

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

Jupiter  vs.  COV

Jupiter

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jupiter are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Jupiter exhibited solid returns over the last few months and may actually be approaching a breakup point.

COV

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COV are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, COV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jupiter and COV

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

The idea behind Jupiter and COV 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.