Correlation Between PURA and JNT

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

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

Diversification Opportunities for PURA and JNT

0.68

Correlation Coefficient

PURA  JNT

Poor diversification

The 3 months correlation between PURA and JNT is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding PURA and JNT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JNT and PURA 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 PURA are associated (or correlated) with JNT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JNT has no effect on the direction of PURA i.e., PURA and JNT go up and down completely randomly.

Pair Corralation between PURA and JNT

Assuming the 90 days trading horizon PURA is expected to generate 2.7 times more return on investment than JNT. However, PURA is 2.7 times more volatile than JNT. It trades about 0.08 of its potential returns per unit of risk. JNT is currently generating about -0.03 per unit of risk. If you would invest  2.98  in PURA on January 25, 2024 and sell it today you would earn a total of  1.22  from holding PURA or generate 40.94% return on investment over 90 days.

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

PURA  vs.  JNT

PURA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PURA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PURA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

JNT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JNT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, JNT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PURA and JNT

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

The idea behind PURA and JNT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..