Correlation Between Jayant Agro and Praj Industries

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

By analyzing existing cross correlation between Jayant Agro Organics and Praj Industries Limited, you can compare the effects of market volatilities on Jayant Agro and Praj 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 Jayant Agro with a short position of Praj Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jayant Agro and Praj Industries.

Diversification Opportunities for Jayant Agro and Praj Industries

0.4

Correlation Coefficient

Jayant Agro  Praj Industries

Very weak diversification

The 3 months correlation between Jayant and Praj is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Jayant Agro Organics and Praj Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praj Industries and Jayant Agro 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 Jayant Agro Organics are associated (or correlated) with Praj Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praj Industries has no effect on the direction of Jayant Agro i.e., Jayant Agro and Praj Industries go up and down completely randomly.

Pair Corralation between Jayant Agro and Praj Industries

Assuming the 90 days trading horizon Jayant Agro is expected to generate 1.45 times less return on investment than Praj Industries. In addition to that, Jayant Agro is 1.04 times more volatile than Praj Industries Limited. It trades about 0.05 of its total potential returns per unit of risk. Praj Industries Limited is currently generating about 0.08 per unit of volatility. If you would invest  35,954  in Praj Industries Limited on September 24, 2024 and sell it today you would earn a total of  45,061  from holding Praj Industries Limited or generate 125.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Jayant Agro Organics  vs.  Praj Industries Limited

Jayant Agro Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jayant Agro Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jayant Agro is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Praj Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Praj Industries Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Praj Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jayant Agro and Praj Industries

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

The idea behind Jayant Agro Organics and Praj Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..