Correlation Between Prodigy Gold and JB Hi

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

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

Diversification Opportunities for Prodigy Gold and JB Hi

-0.16

Correlation Coefficient

Prodigy Gold  JB Hi

Good diversification

The 3 months correlation between Prodigy and JBH is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Prodigy Gold NL and JB Hi Fi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hi Fi and Prodigy Gold 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 Prodigy Gold NL are associated (or correlated) with JB Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hi Fi has no effect on the direction of Prodigy Gold i.e., Prodigy Gold and JB Hi go up and down completely randomly.

Pair Corralation between Prodigy Gold and JB Hi

Assuming the 90 days trading horizon Prodigy Gold NL is expected to generate 13.79 times more return on investment than JB Hi. However, Prodigy Gold is 13.79 times more volatile than JB Hi Fi. It trades about 0.1 of its potential returns per unit of risk. JB Hi Fi is currently generating about 0.2 per unit of risk. If you would invest  0.20  in Prodigy Gold NL on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Prodigy Gold NL or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Prodigy Gold NL  vs.  JB Hi Fi

Prodigy Gold NL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prodigy Gold NL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Prodigy Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

JB Hi Fi

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hi Fi are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, JB Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prodigy Gold and JB Hi

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

The idea behind Prodigy Gold NL and JB Hi Fi 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.