Correlation Between President Bakery and Jay Mart

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

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

Diversification Opportunities for President Bakery and Jay Mart

0.28

Correlation Coefficient

President Bakery  Jay Mart

Modest diversification

The 3 months correlation between President and Jay is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding President Bakery Public and Jay Mart Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jay Mart Public and President Bakery 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 President Bakery Public are associated (or correlated) with Jay Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jay Mart Public has no effect on the direction of President Bakery i.e., President Bakery and Jay Mart go up and down completely randomly.

Pair Corralation between President Bakery and Jay Mart

Assuming the 90 days horizon President Bakery is expected to generate 331.72 times less return on investment than Jay Mart. But when comparing it to its historical volatility, President Bakery Public is 184.71 times less risky than Jay Mart. It trades about 0.08 of its potential returns per unit of risk. Jay Mart Public is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,593  in Jay Mart Public on September 12, 2024 and sell it today you would lose (213.00) from holding Jay Mart Public or give up 13.37% of portfolio value over 90 days.

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

President Bakery Public  vs.  Jay Mart Public

President Bakery Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Bakery Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, President Bakery is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jay Mart Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jay Mart Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Jay Mart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with President Bakery and Jay Mart

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

The idea behind President Bakery Public and Jay Mart Public 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.