Correlation Between Construction JSC and Travel Investment

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

By analyzing existing cross correlation between Construction JSC No5 and Travel Investment and, you can compare the effects of market volatilities on Construction JSC and Travel Investment 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 Construction JSC with a short position of Travel Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construction JSC and Travel Investment.

Diversification Opportunities for Construction JSC and Travel Investment

-0.64

Correlation Coefficient

Construction JSC  Travel Investment

Excellent diversification

The 3 months correlation between Construction and Travel is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Construction JSC No5 and Travel Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Investment and Construction JSC 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 Construction JSC No5 are associated (or correlated) with Travel Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Investment has no effect on the direction of Construction JSC i.e., Construction JSC and Travel Investment go up and down completely randomly.

Pair Corralation between Construction JSC and Travel Investment

Assuming the 90 days trading horizon Construction JSC No5 is expected to generate 2.35 times more return on investment than Travel Investment. However, Construction JSC is 2.35 times more volatile than Travel Investment and. It trades about 0.08 of its potential returns per unit of risk. Travel Investment and is currently generating about -0.04 per unit of risk. If you would invest  1,900,000  in Construction JSC No5 on September 29, 2024 and sell it today you would earn a total of  200,000  from holding Construction JSC No5 or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.37%
Values	Daily Returns

Construction JSC No5  vs.  Travel Investment and

Construction JSC No5

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Construction JSC No5 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Construction JSC displayed solid returns over the last few months and may actually be approaching a breakup point.

Travel Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Travel Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Travel Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Construction JSC and Travel Investment

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

The idea behind Construction JSC No5 and Travel Investment and 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.