Correlation Between Jai Balaji and Fairchem Organics

Can any of the company-specific risk be diversified away by investing in both Jai Balaji and Fairchem Organics 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 Fairchem Organics 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 Fairchem Organics Limited, you can compare the effects of market volatilities on Jai Balaji and Fairchem Organics 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 Fairchem Organics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jai Balaji and Fairchem Organics.

Diversification Opportunities for Jai Balaji and Fairchem Organics

0.23

Correlation Coefficient

Jai Balaji  Fairchem Organics

Modest diversification

The 3 months correlation between Jai and Fairchem is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Fairchem Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairchem Organics 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 Fairchem Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairchem Organics has no effect on the direction of Jai Balaji i.e., Jai Balaji and Fairchem Organics go up and down completely randomly.

Pair Corralation between Jai Balaji and Fairchem Organics

Assuming the 90 days trading horizon Jai Balaji Industries is expected to generate 1.0 times more return on investment than Fairchem Organics. However, Jai Balaji Industries is 1.0 times less risky than Fairchem Organics. It trades about 0.12 of its potential returns per unit of risk. Fairchem Organics Limited is currently generating about 0.01 per unit of risk. If you would invest  33,520  in Jai Balaji Industries on October 4, 2024 and sell it today you would earn a total of  56,750  from holding Jai Balaji Industries or generate 169.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.69%
Values	Daily Returns

Jai Balaji Industries  vs.  Fairchem Organics Limited

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 weak performance in the last few months, the Stock's basic 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.

Fairchem Organics

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Jai Balaji and Fairchem Organics

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

The idea behind Jai Balaji Industries and Fairchem Organics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.