Correlation Between Coal India and Jubilant Foodworks

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

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

Diversification Opportunities for Coal India and Jubilant Foodworks

-0.12

Correlation Coefficient

Coal India  Jubilant Foodworks

Good diversification

The 3 months correlation between Coal and Jubilant is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Coal India Limited and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks and Coal India 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 Coal India Limited are associated (or correlated) with Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of Coal India i.e., Coal India and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Coal India and Jubilant Foodworks

Assuming the 90 days trading horizon Coal India Limited is expected to under-perform the Jubilant Foodworks. But the stock apears to be less risky and, when comparing its historical volatility, Coal India Limited is 1.55 times less risky than Jubilant Foodworks. The stock trades about -0.34 of its potential returns per unit of risk. The Jubilant Foodworks Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  58,525  in Jubilant Foodworks Limited on September 25, 2024 and sell it today you would earn a total of  10,640  from holding Jubilant Foodworks Limited or generate 18.18% return on investment over 90 days.

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

Coal India Limited  vs.  Jubilant Foodworks Limited

Coal India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coal India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Jubilant Foodworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jubilant Foodworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jubilant Foodworks is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Coal India and Jubilant Foodworks

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

The idea behind Coal India Limited and Jubilant Foodworks Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.