Correlation Between RMR and J W

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

By analyzing existing cross correlation between RMR Group and J W Mays, you can compare the effects of market volatilities on RMR and J W 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 RMR with a short position of J W. Check out your portfolio center. Please also check ongoing floating volatility patterns of RMR and J W.

Diversification Opportunities for RMR and J W

-0.1

Correlation Coefficient

RMR  J W

Good diversification

The 3 months correlation between RMR and MAYS is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding RMR Group and J W Mays in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J W Mays and RMR 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 RMR Group are associated (or correlated) with J W. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J W Mays has no effect on the direction of RMR i.e., RMR and J W go up and down completely randomly.

Pair Corralation between RMR and J W

Considering the 90-day investment horizon RMR Group is expected to under-perform the J W. But the stock apears to be less risky and, when comparing its historical volatility, RMR Group is 1.43 times less risky than J W. The stock trades about -0.08 of its potential returns per unit of risk. The J W Mays is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,350  in J W Mays on September 12, 2024 and sell it today you would earn a total of  50.00  from holding J W Mays or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	34.92%
Values	Daily Returns

RMR Group  vs.  J W Mays

RMR Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

J W Mays

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days J W Mays has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, J W is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RMR and J W

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

The idea behind RMR Group and J W Mays 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.