Correlation Between Jai Balaji and IG Petrochemicals

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

Diversification Opportunities for Jai Balaji and IG Petrochemicals

0.18

Correlation Coefficient

Jai Balaji  IG Petrochemicals

Average diversification

The 3 months correlation between Jai and IGPL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals 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 IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of Jai Balaji i.e., Jai Balaji and IG Petrochemicals go up and down completely randomly.

Pair Corralation between Jai Balaji and IG Petrochemicals

Assuming the 90 days trading horizon Jai Balaji Industries is expected to under-perform the IG Petrochemicals. But the stock apears to be less risky and, when comparing its historical volatility, Jai Balaji Industries is 1.24 times less risky than IG Petrochemicals. The stock trades about -0.18 of its potential returns per unit of risk. The IG Petrochemicals Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  58,840  in IG Petrochemicals Limited on October 7, 2024 and sell it today you would lose (3,045) from holding IG Petrochemicals Limited or give up 5.18% of portfolio value over 90 days.

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

Jai Balaji Industries  vs.  IG Petrochemicals 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 latest weak 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.

IG Petrochemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IG Petrochemicals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IG Petrochemicals is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Jai Balaji and IG Petrochemicals

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

The idea behind Jai Balaji Industries and IG Petrochemicals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.