Correlation Between Porsche Automobile and Jardine Cycle

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

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

Diversification Opportunities for Porsche Automobile and Jardine Cycle

0.6

Correlation Coefficient

Porsche Automobile  Jardine Cycle

Poor diversification

The 3 months correlation between Porsche and Jardine is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and Jardine Cycle Carriage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Cycle Carriage and Porsche Automobile 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 Porsche Automobile Holding are associated (or correlated) with Jardine Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Cycle Carriage has no effect on the direction of Porsche Automobile i.e., Porsche Automobile and Jardine Cycle go up and down completely randomly.

Pair Corralation between Porsche Automobile and Jardine Cycle

Assuming the 90 days horizon Porsche Automobile Holding is expected to under-perform the Jardine Cycle. In addition to that, Porsche Automobile is 1.39 times more volatile than Jardine Cycle Carriage. It trades about -0.15 of its total potential returns per unit of risk. Jardine Cycle Carriage is currently generating about -0.06 per unit of volatility. If you would invest  2,060  in Jardine Cycle Carriage on September 17, 2024 and sell it today you would lose (110.00) from holding Jardine Cycle Carriage or give up 5.34% of portfolio value over 90 days.

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

Porsche Automobile Holding  vs.  Jardine Cycle Carriage

Porsche Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobile Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jardine Cycle Carriage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jardine Cycle Carriage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Jardine Cycle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Porsche Automobile and Jardine Cycle

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

The idea behind Porsche Automobile Holding and Jardine Cycle Carriage 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.