Correlation Between Caseys General and J Front

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

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

Diversification Opportunities for Caseys General and J Front

0.76

Correlation Coefficient

Caseys General  J Front

Poor diversification

The 3 months correlation between Caseys and JFROF is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and J Front Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Front Retailing and Caseys General 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 Caseys General Stores are associated (or correlated) with J Front. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Front Retailing has no effect on the direction of Caseys General i.e., Caseys General and J Front go up and down completely randomly.

Pair Corralation between Caseys General and J Front

Given the investment horizon of 90 days Caseys General Stores is expected to generate 9.58 times more return on investment than J Front. However, Caseys General is 9.58 times more volatile than J Front Retailing. It trades about 0.16 of its potential returns per unit of risk. J Front Retailing is currently generating about 0.13 per unit of risk. If you would invest  27,502  in Caseys General Stores on January 26, 2024 and sell it today you would earn a total of  4,062  from holding Caseys General Stores or generate 14.77% return on investment over 90 days.

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

Caseys General Stores  vs.  J Front Retailing

Caseys General Stores

Risk-Adjusted Performance

12 of 100

Good

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

J Front Retailing

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days J Front Retailing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, J Front is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caseys General and J Front

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

The idea behind Caseys General Stores and J Front Retailing 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.