Correlation Between Jai Balaji and Shaily Engineering

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

Diversification Opportunities for Jai Balaji and Shaily Engineering

-0.73

Correlation Coefficient

Jai Balaji  Shaily Engineering

Pay attention - limited upside

The 3 months correlation between Jai and Shaily is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Shaily Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaily Engineering 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 Shaily Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaily Engineering has no effect on the direction of Jai Balaji i.e., Jai Balaji and Shaily Engineering go up and down completely randomly.

Pair Corralation between Jai Balaji and Shaily Engineering

Assuming the 90 days trading horizon Jai Balaji is expected to generate 17.29 times less return on investment than Shaily Engineering. But when comparing it to its historical volatility, Jai Balaji Industries is 1.18 times less risky than Shaily Engineering. It trades about 0.01 of its potential returns per unit of risk. Shaily Engineering Plastics is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  32,427  in Shaily Engineering Plastics on October 7, 2024 and sell it today you would earn a total of  122,493  from holding Shaily Engineering Plastics or generate 377.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.78%
Values	Daily Returns

Jai Balaji Industries  vs.  Shaily Engineering Plastics

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 uncertain 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.

Shaily Engineering

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jai Balaji and Shaily Engineering

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

The idea behind Jai Balaji Industries and Shaily Engineering Plastics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.