Correlation Between Alumina and JBG SMITH

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

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

Diversification Opportunities for Alumina and JBG SMITH

-0.72

Correlation Coefficient

Alumina  JBG SMITH

Pay attention - limited upside

The 3 months correlation between Alumina and JBG is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties and Alumina 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 Alumina Limited are associated (or correlated) with JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of Alumina i.e., Alumina and JBG SMITH go up and down completely randomly.

Pair Corralation between Alumina and JBG SMITH

Assuming the 90 days horizon Alumina Limited is expected to generate 1.11 times more return on investment than JBG SMITH. However, Alumina is 1.11 times more volatile than JBG SMITH Properties. It trades about 0.21 of its potential returns per unit of risk. JBG SMITH Properties is currently generating about -0.13 per unit of risk. If you would invest  92.00  in Alumina Limited on February 7, 2024 and sell it today you would earn a total of  10.00  from holding Alumina Limited or generate 10.87% return on investment over 90 days.

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

Alumina Limited  vs.  JBG SMITH Properties

Alumina Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alumina Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Alumina reported solid returns over the last few months and may actually be approaching a breakup point.

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Alumina and JBG SMITH

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

The idea behind Alumina Limited and JBG SMITH Properties 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.