Correlation Between Jupiter and YFII

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

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

Diversification Opportunities for Jupiter and YFII

-0.43

Correlation Coefficient

Jupiter  YFII

Very good diversification

The 3 months correlation between Jupiter and YFII is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Jupiter and YFII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YFII 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 YFII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YFII has no effect on the direction of Jupiter i.e., Jupiter and YFII go up and down completely randomly.

Pair Corralation between Jupiter and YFII

Assuming the 90 days trading horizon Jupiter is expected to generate 0.64 times more return on investment than YFII. However, Jupiter is 1.57 times less risky than YFII. It trades about 0.17 of its potential returns per unit of risk. YFII is currently generating about 0.04 per unit of risk. If you would invest  70.00  in Jupiter on September 1, 2024 and sell it today you would earn a total of  46.00  from holding Jupiter or generate 65.71% return on investment over 90 days.

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

Jupiter  vs.  YFII

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.

YFII

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YFII are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, YFII exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jupiter and YFII

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

The idea behind Jupiter and YFII 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.