Correlation Between Jai Balaji and Jindal Steel

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

Diversification Opportunities for Jai Balaji and Jindal Steel

0.5

Correlation Coefficient

Jai Balaji  Jindal Steel

Very weak diversification

The 3 months correlation between Jai and Jindal is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Jindal Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Steel Power 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 Jindal Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Steel Power has no effect on the direction of Jai Balaji i.e., Jai Balaji and Jindal Steel go up and down completely randomly.

Pair Corralation between Jai Balaji and Jindal Steel

Assuming the 90 days trading horizon Jai Balaji is expected to generate 2.95 times less return on investment than Jindal Steel. In addition to that, Jai Balaji is 1.46 times more volatile than Jindal Steel Power. It trades about 0.02 of its total potential returns per unit of risk. Jindal Steel Power is currently generating about 0.07 per unit of volatility. If you would invest  72,947  in Jindal Steel Power on October 6, 2024 and sell it today you would earn a total of  22,838  from holding Jindal Steel Power or generate 31.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.78%
Values	Daily Returns

Jai Balaji Industries  vs.  Jindal Steel Power

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 unsteady 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.

Jindal Steel Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Jindal Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Jai Balaji and Jindal Steel

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

The idea behind Jai Balaji Industries and Jindal Steel Power 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.