Correlation Between Bluzelle and JAR

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

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

Diversification Opportunities for Bluzelle and JAR

0.75

Correlation Coefficient

Bluzelle  JAR

Poor diversification

The 3 months correlation between Bluzelle and JAR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bluzelle and JAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAR and Bluzelle 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 Bluzelle are associated (or correlated) with JAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAR has no effect on the direction of Bluzelle i.e., Bluzelle and JAR go up and down completely randomly.

Pair Corralation between Bluzelle and JAR

Assuming the 90 days trading horizon Bluzelle is expected to generate 1.99 times more return on investment than JAR. However, Bluzelle is 1.99 times more volatile than JAR. It trades about -0.1 of its potential returns per unit of risk. JAR is currently generating about -0.24 per unit of risk. If you would invest  45.00  in Bluzelle on January 25, 2024 and sell it today you would lose (8.00) from holding Bluzelle or give up 17.78% of portfolio value over 90 days.

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

Bluzelle  vs.  JAR

Bluzelle

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bluzelle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bluzelle exhibited solid returns over the last few months and may actually be approaching a breakup point.

JAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JAR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluzelle and JAR

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

The idea behind Bluzelle and JAR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.