Correlation Between Jai Balaji and UltraTech Cement

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

Diversification Opportunities for Jai Balaji and UltraTech Cement

-0.15

Correlation Coefficient

Jai Balaji  UltraTech Cement

Good diversification

The 3 months correlation between Jai and UltraTech is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and UltraTech Cement Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UltraTech Cement 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 UltraTech Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UltraTech Cement has no effect on the direction of Jai Balaji i.e., Jai Balaji and UltraTech Cement go up and down completely randomly.

Pair Corralation between Jai Balaji and UltraTech Cement

Assuming the 90 days trading horizon Jai Balaji Industries is expected to generate 35.41 times more return on investment than UltraTech Cement. However, Jai Balaji is 35.41 times more volatile than UltraTech Cement Limited. It trades about 0.09 of its potential returns per unit of risk. UltraTech Cement Limited is currently generating about 0.0 per unit of risk. If you would invest  21,040  in Jai Balaji Industries on October 23, 2024 and sell it today you would lose (5,740) from holding Jai Balaji Industries or give up 27.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Jai Balaji Industries  vs.  UltraTech Cement 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 weak basic indicators, Jai Balaji sustained solid returns over the last few months and may actually be approaching a breakup point.

UltraTech Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UltraTech Cement Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, UltraTech Cement is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jai Balaji and UltraTech Cement

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

The idea behind Jai Balaji Industries and UltraTech Cement 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.