Correlation Between Alkali Metals and JTL Industries

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

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

Diversification Opportunities for Alkali Metals and JTL Industries

0.41

Correlation Coefficient

Alkali Metals  JTL Industries

Very weak diversification

The 3 months correlation between Alkali and JTL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and JTL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JTL Industries and Alkali Metals 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 Alkali Metals 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 Alkali Metals i.e., Alkali Metals and JTL Industries go up and down completely randomly.

Pair Corralation between Alkali Metals and JTL Industries

Assuming the 90 days trading horizon Alkali Metals Limited is expected to generate 0.88 times more return on investment than JTL Industries. However, Alkali Metals Limited is 1.14 times less risky than JTL Industries. It trades about -0.18 of its potential returns per unit of risk. JTL Industries is currently generating about -0.16 per unit of risk. If you would invest  11,928  in Alkali Metals Limited on September 29, 2024 and sell it today you would lose (779.00) from holding Alkali Metals Limited or give up 6.53% of portfolio value over 90 days.

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

Alkali Metals Limited  vs.  JTL Industries

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Alkali Metals and JTL Industries

The main advantage of trading using opposite Alkali Metals and JTL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkali Metals 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 Alkali Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.