Correlation Between Aban Offshore and JTL Industries

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

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

Diversification Opportunities for Aban Offshore and JTL Industries

0.67

Correlation Coefficient

Aban Offshore  JTL Industries

Poor diversification

The 3 months correlation between Aban and JTL is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Aban Offshore Limited and JTL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JTL Industries and Aban Offshore 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 Aban Offshore Limited are associated (or correlated) with JTL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JTL Industries has no effect on the direction of Aban Offshore i.e., Aban Offshore and JTL Industries go up and down completely randomly.

Pair Corralation between Aban Offshore and JTL Industries

Assuming the 90 days trading horizon Aban Offshore Limited is expected to generate 1.51 times more return on investment than JTL Industries. However, Aban Offshore is 1.51 times more volatile than JTL Industries. It trades about 0.12 of its potential returns per unit of risk. JTL Industries is currently generating about 0.18 per unit of risk. If you would invest  6,358  in Aban Offshore Limited on September 19, 2024 and sell it today you would earn a total of  340.00  from holding Aban Offshore Limited or generate 5.35% return on investment over 90 days.

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

Aban Offshore Limited  vs.  JTL Industries

Aban Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aban Offshore is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

JTL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JTL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aban Offshore and JTL Industries

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

The idea behind Aban Offshore Limited and JTL Industries 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.