Correlation Between Jat Holdings and Central Industries

Can any of the company-specific risk be diversified away by investing in both Jat Holdings and Central Industries 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 Jat Holdings and Central Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jat Holdings PLC and Central Industries PLC, you can compare the effects of market volatilities on Jat Holdings and Central Industries 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 Jat Holdings with a short position of Central Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jat Holdings and Central Industries.

Diversification Opportunities for Jat Holdings and Central Industries

0.86

Correlation Coefficient

Jat Holdings  Central Industries

Very poor diversification

The 3 months correlation between Jat and Central is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Jat Holdings PLC and Central Industries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Industries PLC and Jat Holdings 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 Jat Holdings PLC are associated (or correlated) with Central Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Industries PLC has no effect on the direction of Jat Holdings i.e., Jat Holdings and Central Industries go up and down completely randomly.

Pair Corralation between Jat Holdings and Central Industries

Assuming the 90 days trading horizon Jat Holdings is expected to generate 1.27 times less return on investment than Central Industries. But when comparing it to its historical volatility, Jat Holdings PLC is 1.02 times less risky than Central Industries. It trades about 0.28 of its potential returns per unit of risk. Central Industries PLC is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  12,875  in Central Industries PLC on October 11, 2024 and sell it today you would earn a total of  2,625  from holding Central Industries PLC or generate 20.39% return on investment over 90 days.

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

Jat Holdings PLC  vs.  Central Industries PLC

Jat Holdings PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Central Industries PLC

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Jat Holdings and Central Industries

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

The idea behind Jat Holdings PLC and Central Industries PLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.