Correlation Between Jai Balaji and Agarwal Industrial

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

By analyzing existing cross correlation between Jai Balaji Industries and Agarwal Industrial, you can compare the effects of market volatilities on Jai Balaji and Agarwal Industrial 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 Jai Balaji with a short position of Agarwal Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jai Balaji and Agarwal Industrial.

Diversification Opportunities for Jai Balaji and Agarwal Industrial

-0.35

Correlation Coefficient

Jai Balaji  Agarwal Industrial

Very good diversification

The 3 months correlation between Jai and Agarwal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and Jai Balaji 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 Jai Balaji Industries are associated (or correlated) with Agarwal Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agarwal Industrial has no effect on the direction of Jai Balaji i.e., Jai Balaji and Agarwal Industrial go up and down completely randomly.

Pair Corralation between Jai Balaji and Agarwal Industrial

Assuming the 90 days trading horizon Jai Balaji Industries is expected to generate 1.12 times more return on investment than Agarwal Industrial. However, Jai Balaji is 1.12 times more volatile than Agarwal Industrial. It trades about 0.22 of its potential returns per unit of risk. Agarwal Industrial is currently generating about 0.08 per unit of risk. If you would invest  4,725  in Jai Balaji Industries on October 5, 2024 and sell it today you would earn a total of  85,545  from holding Jai Balaji Industries or generate 1810.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.32%
Values	Daily Returns

Jai Balaji Industries  vs.  Agarwal Industrial

Jai Balaji Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jai Balaji Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Agarwal Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Agarwal Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jai Balaji and Agarwal Industrial

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

The idea behind Jai Balaji Industries and Agarwal Industrial 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.