Correlation Between Jai Balaji and Mangalore Chemicals

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

Diversification Opportunities for Jai Balaji and Mangalore Chemicals

-0.62

Correlation Coefficient

Jai Balaji  Mangalore Chemicals

Excellent diversification

The 3 months correlation between Jai and Mangalore is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore Chemicals 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 Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of Jai Balaji i.e., Jai Balaji and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between Jai Balaji and Mangalore Chemicals

Assuming the 90 days trading horizon Jai Balaji Industries is expected to under-perform the Mangalore Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Jai Balaji Industries is 1.09 times less risky than Mangalore Chemicals. The stock trades about -0.07 of its potential returns per unit of risk. The Mangalore Chemicals Fertilizers is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  12,848  in Mangalore Chemicals Fertilizers on October 6, 2024 and sell it today you would earn a total of  4,453  from holding Mangalore Chemicals Fertilizers or generate 34.66% return on investment over 90 days.

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

Jai Balaji Industries  vs.  Mangalore Chemicals Fertilizer

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.

Mangalore Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jai Balaji and Mangalore Chemicals

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

The idea behind Jai Balaji Industries and Mangalore Chemicals Fertilizers 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.