Correlation Between Hindustan Construction and Jubilant Foodworks

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

By analyzing existing cross correlation between Hindustan Construction and Jubilant Foodworks Limited, you can compare the effects of market volatilities on Hindustan Construction and Jubilant Foodworks 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 Hindustan Construction with a short position of Jubilant Foodworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Construction and Jubilant Foodworks.

Diversification Opportunities for Hindustan Construction and Jubilant Foodworks

0.34

Correlation Coefficient

Hindustan Construction  Jubilant Foodworks

Weak diversification

The 3 months correlation between Hindustan and Jubilant is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks and Hindustan Construction 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 Hindustan Construction are associated (or correlated) with Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of Hindustan Construction i.e., Hindustan Construction and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Hindustan Construction and Jubilant Foodworks

Assuming the 90 days trading horizon Hindustan Construction is expected to under-perform the Jubilant Foodworks. In addition to that, Hindustan Construction is 1.82 times more volatile than Jubilant Foodworks Limited. It trades about -0.26 of its total potential returns per unit of risk. Jubilant Foodworks Limited is currently generating about 0.23 per unit of volatility. If you would invest  69,470  in Jubilant Foodworks Limited on October 10, 2024 and sell it today you would earn a total of  6,455  from holding Jubilant Foodworks Limited or generate 9.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Hindustan Construction  vs.  Jubilant Foodworks Limited

Hindustan Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hindustan Construction is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Jubilant Foodworks

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hindustan Construction and Jubilant Foodworks

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

The idea behind Hindustan Construction and Jubilant Foodworks 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.