Correlation Between Fairchem Organics and Jindal Poly

Can any of the company-specific risk be diversified away by investing in both Fairchem Organics and Jindal Poly 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 Jindal Poly 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 Jindal Poly Investment, you can compare the effects of market volatilities on Fairchem Organics and Jindal Poly 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 Jindal Poly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairchem Organics and Jindal Poly.

Diversification Opportunities for Fairchem Organics and Jindal Poly

-0.63

Correlation Coefficient

Fairchem Organics  Jindal Poly

Excellent diversification

The 3 months correlation between Fairchem and Jindal is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fairchem Organics Limited and Jindal Poly Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Poly Investment 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 Jindal Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Poly Investment has no effect on the direction of Fairchem Organics i.e., Fairchem Organics and Jindal Poly go up and down completely randomly.

Pair Corralation between Fairchem Organics and Jindal Poly

Assuming the 90 days trading horizon Fairchem Organics Limited is expected to under-perform the Jindal Poly. In addition to that, Fairchem Organics is 1.28 times more volatile than Jindal Poly Investment. It trades about 0.0 of its total potential returns per unit of risk. Jindal Poly Investment is currently generating about 0.1 per unit of volatility. If you would invest  81,130  in Jindal Poly Investment on September 19, 2024 and sell it today you would earn a total of  15,780  from holding Jindal Poly Investment or generate 19.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Fairchem Organics Limited  vs.  Jindal Poly Investment

Fairchem Organics

Risk-Adjusted Performance

0 of 100

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 rather sound primary indicators, Fairchem Organics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Jindal Poly Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Poly Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Jindal Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fairchem Organics and Jindal Poly

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

The idea behind Fairchem Organics Limited and Jindal Poly Investment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.