Correlation Between Tensor and Jupiter

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

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

Diversification Opportunities for Tensor and Jupiter

0.88

Correlation Coefficient

Tensor  Jupiter

Very poor diversification

The 3 months correlation between Tensor and Jupiter is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tensor and Jupiter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jupiter and Tensor 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 Tensor are associated (or correlated) with Jupiter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jupiter has no effect on the direction of Tensor i.e., Tensor and Jupiter go up and down completely randomly.

Pair Corralation between Tensor and Jupiter

Assuming the 90 days trading horizon Tensor is expected to generate 1.41 times more return on investment than Jupiter. However, Tensor is 1.41 times more volatile than Jupiter. It trades about 0.2 of its potential returns per unit of risk. Jupiter is currently generating about 0.17 per unit of risk. If you would invest  31.00  in Tensor on September 2, 2024 and sell it today you would earn a total of  39.00  from holding Tensor or generate 125.81% return on investment over 90 days.

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

Tensor  vs.  Jupiter

Tensor

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tensor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Tensor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Jupiter

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jupiter are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Jupiter exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tensor and Jupiter

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

The idea behind Tensor and Jupiter 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.