Correlation Between Jai Balaji and Laxmi Organic

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

Diversification Opportunities for Jai Balaji and Laxmi Organic

0.84

Correlation Coefficient

Jai Balaji  Laxmi Organic

Very poor diversification

The 3 months correlation between Jai and Laxmi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Laxmi Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laxmi Organic Industries 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 Laxmi Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laxmi Organic Industries has no effect on the direction of Jai Balaji i.e., Jai Balaji and Laxmi Organic go up and down completely randomly.

Pair Corralation between Jai Balaji and Laxmi Organic

Assuming the 90 days trading horizon Jai Balaji Industries is expected to generate 1.54 times more return on investment than Laxmi Organic. However, Jai Balaji is 1.54 times more volatile than Laxmi Organic Industries. It trades about -0.09 of its potential returns per unit of risk. Laxmi Organic Industries is currently generating about -0.19 per unit of risk. If you would invest  18,184  in Jai Balaji Industries on December 25, 2024 and sell it today you would lose (4,166) from holding Jai Balaji Industries or give up 22.91% of portfolio value over 90 days.

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

Jai Balaji Industries  vs.  Laxmi Organic Industries

Jai Balaji Industries

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Laxmi Organic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laxmi Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jai Balaji and Laxmi Organic

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

The idea behind Jai Balaji Industries and Laxmi Organic Industries 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.