Correlation Between Jai Balaji and Surya Roshni

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

Diversification Opportunities for Jai Balaji and Surya Roshni

0.98

Correlation Coefficient

Jai Balaji  Surya Roshni

Almost no diversification

The 3 months correlation between Jai and Surya is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Surya Roshni Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surya Roshni Limited 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 Surya Roshni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surya Roshni Limited has no effect on the direction of Jai Balaji i.e., Jai Balaji and Surya Roshni go up and down completely randomly.

Pair Corralation between Jai Balaji and Surya Roshni

Assuming the 90 days trading horizon Jai Balaji is expected to generate 3.01 times less return on investment than Surya Roshni. But when comparing it to its historical volatility, Jai Balaji Industries is 2.46 times less risky than Surya Roshni. It trades about 0.09 of its potential returns per unit of risk. Surya Roshni Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  32,470  in Surya Roshni Limited on October 21, 2024 and sell it today you would lose (5,930) from holding Surya Roshni Limited or give up 18.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Jai Balaji Industries  vs.  Surya Roshni Limited

Jai Balaji Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jai Balaji Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Jai Balaji sustained solid returns over the last few months and may actually be approaching a breakup point.

Surya Roshni Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Surya Roshni Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Surya Roshni displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jai Balaji and Surya Roshni

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

The idea behind Jai Balaji Industries and Surya Roshni 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.