Correlation Between Jai Balaji and Kamdhenu

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

Diversification Opportunities for Jai Balaji and Kamdhenu

0.98

Correlation Coefficient

Jai Balaji  Kamdhenu

Almost no diversification

The 3 months correlation between Jai and Kamdhenu is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Kamdhenu Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamdhenu Limited 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 Kamdhenu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamdhenu Limited has no effect on the direction of Jai Balaji i.e., Jai Balaji and Kamdhenu go up and down completely randomly.

Pair Corralation between Jai Balaji and Kamdhenu

Assuming the 90 days trading horizon Jai Balaji is expected to generate 3.07 times less return on investment than Kamdhenu. But when comparing it to its historical volatility, Jai Balaji Industries is 2.46 times less risky than Kamdhenu. It trades about 0.09 of its potential returns per unit of risk. Kamdhenu Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,516  in Kamdhenu Limited on October 26, 2024 and sell it today you would lose (211.00) from holding Kamdhenu Limited or give up 4.67% of portfolio value over 90 days.

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

Jai Balaji Industries  vs.  Kamdhenu Limited

Jai Balaji Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jai Balaji Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Jai Balaji sustained solid returns over the last few months and may actually be approaching a breakup point.

Kamdhenu Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamdhenu Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Kamdhenu displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jai Balaji and Kamdhenu

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

The idea behind Jai Balaji Industries and Kamdhenu 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.