Correlation Between Garware Hi and JGCHEMICALS

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

By analyzing existing cross correlation between Garware Hi Tech Films and JGCHEMICALS LIMITED, you can compare the effects of market volatilities on Garware Hi and JGCHEMICALS 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 Garware Hi with a short position of JGCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garware Hi and JGCHEMICALS.

Diversification Opportunities for Garware Hi and JGCHEMICALS

0.79

Correlation Coefficient

Garware Hi  JGCHEMICALS

Poor diversification

The 3 months correlation between Garware and JGCHEMICALS is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and JGCHEMICALS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JGCHEMICALS LIMITED and Garware Hi 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 Garware Hi Tech Films are associated (or correlated) with JGCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JGCHEMICALS LIMITED has no effect on the direction of Garware Hi i.e., Garware Hi and JGCHEMICALS go up and down completely randomly.

Pair Corralation between Garware Hi and JGCHEMICALS

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 0.88 times more return on investment than JGCHEMICALS. However, Garware Hi Tech Films is 1.13 times less risky than JGCHEMICALS. It trades about 0.17 of its potential returns per unit of risk. JGCHEMICALS LIMITED is currently generating about 0.04 per unit of risk. If you would invest  369,785  in Garware Hi Tech Films on October 8, 2024 and sell it today you would earn a total of  140,450  from holding Garware Hi Tech Films or generate 37.98% return on investment over 90 days.

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

Garware Hi Tech Films  vs.  JGCHEMICALS LIMITED

Garware Hi Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

JGCHEMICALS LIMITED

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, JGCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Garware Hi and JGCHEMICALS

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

The idea behind Garware Hi Tech Films and JGCHEMICALS LIMITED 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.