Correlation Between Fairchem Organics and JB Chemicals

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

By analyzing existing cross correlation between Fairchem Organics Limited and JB Chemicals Pharmaceuticals, you can compare the effects of market volatilities on Fairchem Organics and JB Chemicals 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 Fairchem Organics with a short position of JB Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairchem Organics and JB Chemicals.

Diversification Opportunities for Fairchem Organics and JB Chemicals

0.71

Correlation Coefficient

Fairchem Organics  JB Chemicals

Poor diversification

The 3 months correlation between Fairchem and JBCHEPHARM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fairchem Organics Limited and JB Chemicals Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Chemicals Pharmac and Fairchem Organics 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 Fairchem Organics Limited are associated (or correlated) with JB Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Chemicals Pharmac has no effect on the direction of Fairchem Organics i.e., Fairchem Organics and JB Chemicals go up and down completely randomly.

Pair Corralation between Fairchem Organics and JB Chemicals

Assuming the 90 days trading horizon Fairchem Organics Limited is expected to under-perform the JB Chemicals. In addition to that, Fairchem Organics is 2.0 times more volatile than JB Chemicals Pharmaceuticals. It trades about -0.1 of its total potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about -0.09 per unit of volatility. If you would invest  186,108  in JB Chemicals Pharmaceuticals on December 30, 2024 and sell it today you would lose (23,788) from holding JB Chemicals Pharmaceuticals or give up 12.78% of portfolio value over 90 days.

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

Fairchem Organics Limited  vs.  JB Chemicals Pharmaceuticals

Fairchem Organics

Risk-Adjusted Performance

Very Weak

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

JB Chemicals Pharmac

Risk-Adjusted Performance

Very Weak

Over the last 90 days JB Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Fairchem Organics and JB Chemicals

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

The idea behind Fairchem Organics Limited and JB Chemicals Pharmaceuticals 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.