Correlation Between Jai Balaji and Malu Paper

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

Diversification Opportunities for Jai Balaji and Malu Paper

0.19

Correlation Coefficient

Jai Balaji  Malu Paper

Average diversification

The 3 months correlation between Jai and Malu is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Malu Paper Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malu Paper Mills 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 Malu Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malu Paper Mills has no effect on the direction of Jai Balaji i.e., Jai Balaji and Malu Paper go up and down completely randomly.

Pair Corralation between Jai Balaji and Malu Paper

Assuming the 90 days trading horizon Jai Balaji is expected to generate 1.26 times less return on investment than Malu Paper. But when comparing it to its historical volatility, Jai Balaji Industries is 1.37 times less risky than Malu Paper. It trades about 0.01 of its potential returns per unit of risk. Malu Paper Mills is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,940  in Malu Paper Mills on October 5, 2024 and sell it today you would lose (326.00) from holding Malu Paper Mills or give up 6.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Jai Balaji Industries  vs.  Malu Paper Mills

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 inconsistent 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.

Malu Paper Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malu Paper Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Malu Paper is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Jai Balaji and Malu Paper

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

The idea behind Jai Balaji Industries and Malu Paper Mills 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.