Correlation Between Jai Balaji and Pondy Oxides

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

Diversification Opportunities for Jai Balaji and Pondy Oxides

0.81

Correlation Coefficient

Jai Balaji  Pondy Oxides

Very poor diversification

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

Pair Corralation between Jai Balaji and Pondy Oxides

Assuming the 90 days trading horizon Jai Balaji is expected to generate 1.95 times less return on investment than Pondy Oxides. But when comparing it to its historical volatility, Jai Balaji Industries is 4.43 times less risky than Pondy Oxides. It trades about 0.21 of its potential returns per unit of risk. Pondy Oxides Chemicals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,130  in Pondy Oxides Chemicals on October 5, 2024 and sell it today you would earn a total of  82,555  from holding Pondy Oxides Chemicals or generate 1346.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.05%
Values	Daily Returns

Jai Balaji Industries  vs.  Pondy Oxides Chemicals

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.

Pondy Oxides Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pondy Oxides Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pondy Oxides is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Jai Balaji and Pondy Oxides

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

The idea behind Jai Balaji Industries and Pondy Oxides Chemicals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.