Correlation Between JB Chemicals and IG Petrochemicals

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

Diversification Opportunities for JB Chemicals and IG Petrochemicals

0.15

Correlation Coefficient

JB Chemicals  IG Petrochemicals

Average diversification

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

Pair Corralation between JB Chemicals and IG Petrochemicals

Assuming the 90 days trading horizon JB Chemicals Pharmaceuticals is expected to generate 0.66 times more return on investment than IG Petrochemicals. However, JB Chemicals Pharmaceuticals is 1.51 times less risky than IG Petrochemicals. It trades about -0.24 of its potential returns per unit of risk. IG Petrochemicals Limited is currently generating about -0.23 per unit of risk. If you would invest  191,650  in JB Chemicals Pharmaceuticals on October 20, 2024 and sell it today you would lose (16,870) from holding JB Chemicals Pharmaceuticals or give up 8.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

JB Chemicals Pharmaceuticals  vs.  IG Petrochemicals Limited

JB Chemicals Pharmac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JB Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with JB Chemicals and IG Petrochemicals

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

The idea behind JB Chemicals Pharmaceuticals and IG Petrochemicals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.