Correlation Between JB Chemicals and Gujarat Fluorochemicals

Can any of the company-specific risk be diversified away by investing in both JB Chemicals and Gujarat Fluorochemicals 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 JB Chemicals and Gujarat Fluorochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JB Chemicals Pharmaceuticals and Gujarat Fluorochemicals Limited, you can compare the effects of market volatilities on JB Chemicals and Gujarat Fluorochemicals 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 JB Chemicals with a short position of Gujarat Fluorochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Chemicals and Gujarat Fluorochemicals.

Diversification Opportunities for JB Chemicals and Gujarat Fluorochemicals

0.59

Correlation Coefficient

JB Chemicals  Gujarat Fluorochemicals

Very weak diversification

The 3 months correlation between JBCHEPHARM and Gujarat is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding JB Chemicals Pharmaceuticals and Gujarat Fluorochemicals Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Fluorochemicals and JB Chemicals 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 JB Chemicals Pharmaceuticals are associated (or correlated) with Gujarat Fluorochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Fluorochemicals has no effect on the direction of JB Chemicals i.e., JB Chemicals and Gujarat Fluorochemicals go up and down completely randomly.

Pair Corralation between JB Chemicals and Gujarat Fluorochemicals

Assuming the 90 days trading horizon JB Chemicals Pharmaceuticals is expected to generate 3.48 times more return on investment than Gujarat Fluorochemicals. However, JB Chemicals is 3.48 times more volatile than Gujarat Fluorochemicals Limited. It trades about 0.05 of its potential returns per unit of risk. Gujarat Fluorochemicals Limited is currently generating about 0.05 per unit of risk. If you would invest  95,347  in JB Chemicals Pharmaceuticals on October 5, 2024 and sell it today you would earn a total of  91,108  from holding JB Chemicals Pharmaceuticals or generate 95.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

JB Chemicals Pharmaceuticals  vs.  Gujarat Fluorochemicals Limite

JB Chemicals Pharmac

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JB Chemicals Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, JB Chemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gujarat Fluorochemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Gujarat Fluorochemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JB Chemicals and Gujarat Fluorochemicals

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

The idea behind JB Chemicals Pharmaceuticals and Gujarat Fluorochemicals 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.