Correlation Between Gujarat Fluorochemicals and JB Chemicals

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

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

Diversification Opportunities for Gujarat Fluorochemicals and JB Chemicals

0.64

Correlation Coefficient

Gujarat Fluorochemicals  JB Chemicals

Poor diversification

The 3 months correlation between Gujarat and JBCHEPHARM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite 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 Gujarat Fluorochemicals 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 Gujarat Fluorochemicals 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 Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and JB Chemicals go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and JB Chemicals

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to under-perform the JB Chemicals. In addition to that, Gujarat Fluorochemicals is 1.13 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  180,600  in JB Chemicals Pharmaceuticals on December 11, 2024 and sell it today you would lose (21,520) from holding JB Chemicals Pharmaceuticals or give up 11.92% of portfolio value over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  JB Chemicals Pharmaceuticals

Gujarat Fluorochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Fluorochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical 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 abnormal 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 Gujarat Fluorochemicals and JB Chemicals

The main advantage of trading using opposite Gujarat Fluorochemicals and JB Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Fluorochemicals 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 Gujarat Fluorochemicals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.