Can any of the company-specific risk be diversified away by investing in both JBG SMITH and Montauk Renewables 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 JBG SMITH and Montauk Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JBG SMITH Properties and Montauk Renewables, you can compare the effects of market volatilities on JBG SMITH and Montauk Renewables 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 JBG SMITH with a short position of Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of JBG SMITH and Montauk Renewables.
Diversification Opportunities for JBG SMITH and Montauk Renewables
The 3 months correlation between JBG and Montauk is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding JBG SMITH Properties and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables and JBG SMITH 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 JBG SMITH Properties are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of JBG SMITH i.e., JBG SMITH and Montauk Renewables go up and down completely randomly.
Pair Corralation between JBG SMITH and Montauk Renewables
Given the investment horizon of 90 days JBG SMITH Properties is expected to generate 0.42 times more return on investment than Montauk Renewables. However, JBG SMITH Properties is 2.39 times less risky than Montauk Renewables. It trades about 0.03 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.05 per unit of risk. If you would invest 1,330 in JBG SMITH Properties on March 6, 2024 and sell it today you would earn a total of 107.00 from holding JBG SMITH Properties or generate 8.05% return on investment over 90 days.
Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Montauk Renewables may actually be approaching a critical reversion point that can send shares even higher in July 2024.