Correlation Between Engineers India and JSW Holdings

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

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

Diversification Opportunities for Engineers India and JSW Holdings

-0.35

Correlation Coefficient

Engineers India  JSW Holdings

Very good diversification

The 3 months correlation between Engineers and JSW is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Engineers India Limited and JSW Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Holdings Limited and Engineers 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 Engineers India Limited are associated (or correlated) with JSW Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Holdings Limited has no effect on the direction of Engineers India i.e., Engineers India and JSW Holdings go up and down completely randomly.

Pair Corralation between Engineers India and JSW Holdings

Assuming the 90 days trading horizon Engineers India is expected to generate 1.21 times less return on investment than JSW Holdings. In addition to that, Engineers India is 1.13 times more volatile than JSW Holdings Limited. It trades about 0.07 of its total potential returns per unit of risk. JSW Holdings Limited is currently generating about 0.1 per unit of volatility. If you would invest  441,660  in JSW Holdings Limited on September 23, 2024 and sell it today you would earn a total of  1,000,185  from holding JSW Holdings Limited or generate 226.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Engineers India Limited  vs.  JSW Holdings Limited

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

JSW Holdings Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Engineers India and JSW Holdings

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

The idea behind Engineers India Limited and JSW Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.