Correlation Between Gujarat Lease and JB Chemicals

Can any of the company-specific risk be diversified away by investing in both Gujarat Lease 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 Lease 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 Lease Financing and JB Chemicals Pharmaceuticals, you can compare the effects of market volatilities on Gujarat Lease 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 Lease with a short position of JB Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Lease and JB Chemicals.

Diversification Opportunities for Gujarat Lease and JB Chemicals

0.16

Correlation Coefficient

Gujarat Lease  JB Chemicals

Average diversification

The 3 months correlation between Gujarat and JBCHEPHARM is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing 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 Lease 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 Lease Financing 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 Lease i.e., Gujarat Lease and JB Chemicals go up and down completely randomly.

Pair Corralation between Gujarat Lease and JB Chemicals

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to under-perform the JB Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Lease Financing is 1.27 times less risky than JB Chemicals. The stock trades about -0.06 of its potential returns per unit of risk. The JB Chemicals Pharmaceuticals is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  184,500  in JB Chemicals Pharmaceuticals on October 14, 2024 and sell it today you would lose (2,195) from holding JB Chemicals Pharmaceuticals or give up 1.19% of portfolio value over 90 days.

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

Gujarat Lease Financing  vs.  JB Chemicals Pharmaceuticals

Gujarat Lease Financing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gujarat Lease is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

JB Chemicals Pharmac

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, JB Chemicals is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gujarat Lease and JB Chemicals

The main advantage of trading using opposite Gujarat Lease and JB Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Lease 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 Lease Financing 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..