Correlation Between Generic Engineering and JB Chemicals

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

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

Diversification Opportunities for Generic Engineering and JB Chemicals

0.87

Correlation Coefficient

Generic Engineering  JB Chemicals

Very poor diversification

The 3 months correlation between Generic and JBCHEPHARM is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi 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 Generic Engineering 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 Generic Engineering Construction 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 Generic Engineering i.e., Generic Engineering and JB Chemicals go up and down completely randomly.

Pair Corralation between Generic Engineering and JB Chemicals

Assuming the 90 days trading horizon Generic Engineering Construction is expected to under-perform the JB Chemicals. In addition to that, Generic Engineering is 1.67 times more volatile than JB Chemicals Pharmaceuticals. It trades about -0.42 of its total potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about -0.11 per unit of volatility. If you would invest  171,943  in JB Chemicals Pharmaceuticals on December 5, 2024 and sell it today you would lose (11,258) from holding JB Chemicals Pharmaceuticals or give up 6.55% of portfolio value over 90 days.

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

Generic Engineering Constructi  vs.  JB Chemicals Pharmaceuticals

Generic Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Generic Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 uncertain 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 Generic Engineering and JB Chemicals

The main advantage of trading using opposite Generic Engineering and JB Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generic Engineering 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 Generic Engineering Construction 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.