Correlation Between HEG and JB Chemicals

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

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

Diversification Opportunities for HEG and JB Chemicals

0.18

Correlation Coefficient

HEG  JB Chemicals

Average diversification

The 3 months correlation between HEG and JBCHEPHARM is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding HEG Limited 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 HEG 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 HEG 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 HEG i.e., HEG and JB Chemicals go up and down completely randomly.

Pair Corralation between HEG and JB Chemicals

Assuming the 90 days trading horizon HEG Limited is expected to generate 3.44 times more return on investment than JB Chemicals. However, HEG is 3.44 times more volatile than JB Chemicals Pharmaceuticals. It trades about 0.17 of its potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about 0.17 per unit of risk. If you would invest  43,830  in HEG Limited on September 29, 2024 and sell it today you would earn a total of  7,700  from holding HEG Limited or generate 17.57% return on investment over 90 days.

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

HEG Limited  vs.  JB Chemicals Pharmaceuticals

HEG Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, HEG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with HEG and JB Chemicals

The main advantage of trading using opposite HEG and JB Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEG 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 HEG 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.