Correlation Between Hindustan Foods and Jubilant Foodworks

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Can any of the company-specific risk be diversified away by investing in both Hindustan Foods 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 Foods 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 Foods Limited and Jubilant Foodworks Limited, you can compare the effects of market volatilities on Hindustan Foods 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 Foods with a short position of Jubilant Foodworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Foods and Jubilant Foodworks.

Diversification Opportunities for Hindustan Foods and Jubilant Foodworks

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Hindustan and Jubilant is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited 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 Foods 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 Foods Limited 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 Foods i.e., Hindustan Foods and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Hindustan Foods and Jubilant Foodworks

Assuming the 90 days trading horizon Hindustan Foods Limited is expected to under-perform the Jubilant Foodworks. But the stock apears to be less risky and, when comparing its historical volatility, Hindustan Foods Limited is 1.3 times less risky than Jubilant Foodworks. The stock trades about -0.21 of its potential returns per unit of risk. The Jubilant Foodworks Limited is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  60,725  in Jubilant Foodworks Limited on October 9, 2024 and sell it today you would earn a total of  15,935  from holding Jubilant Foodworks Limited or generate 26.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hindustan Foods Limited  vs.  Jubilant Foodworks Limited

 Performance 
       Timeline  
Hindustan Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Jubilant Foodworks 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
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.

Hindustan Foods and Jubilant Foodworks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hindustan Foods and Jubilant Foodworks

The main advantage of trading using opposite Hindustan Foods and Jubilant Foodworks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindustan Foods 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 Foods Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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