Correlation Between Jai Balaji and Manali Petrochemicals

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

Diversification Opportunities for Jai Balaji and Manali Petrochemicals

0.81

Correlation Coefficient

Jai Balaji  Manali Petrochemicals

Very poor diversification

The 3 months correlation between Jai and Manali is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Manali Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manali 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 Manali Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manali Petrochemicals has no effect on the direction of Jai Balaji i.e., Jai Balaji and Manali Petrochemicals go up and down completely randomly.

Pair Corralation between Jai Balaji and Manali Petrochemicals

Assuming the 90 days trading horizon Jai Balaji Industries is expected to under-perform the Manali Petrochemicals. In addition to that, Jai Balaji is 1.19 times more volatile than Manali Petrochemicals Limited. It trades about -0.15 of its total potential returns per unit of risk. Manali Petrochemicals Limited is currently generating about -0.03 per unit of volatility. If you would invest  6,663  in Manali Petrochemicals Limited on October 6, 2024 and sell it today you would lose (223.00) from holding Manali Petrochemicals Limited or give up 3.35% 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.  Manali 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 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.

Manali Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manali Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Jai Balaji and Manali Petrochemicals

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

The idea behind Jai Balaji Industries and Manali 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.