Correlation Between Jupiter and IQC

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

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

Diversification Opportunities for Jupiter and IQC

0.88

Correlation Coefficient

Jupiter  IQC

Very poor diversification

The 3 months correlation between Jupiter and IQC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Jupiter and IQC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQC 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 IQC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQC has no effect on the direction of Jupiter i.e., Jupiter and IQC go up and down completely randomly.

Pair Corralation between Jupiter and IQC

Assuming the 90 days trading horizon Jupiter is expected to generate 1.56 times more return on investment than IQC. However, Jupiter is 1.56 times more volatile than IQC. It trades about 0.17 of its potential returns per unit of risk. IQC is currently generating about 0.25 per unit of risk. If you would invest  73.00  in Jupiter on September 3, 2024 and sell it today you would earn a total of  47.00  from holding Jupiter or generate 64.38% return on investment over 90 days.

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

Jupiter  vs.  IQC

Jupiter

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jupiter are ranked lower than 13 (%) 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.

IQC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IQC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, IQC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jupiter and IQC

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

The idea behind Jupiter and IQC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.