Correlation Between JB Chemicals and Modi Rubber

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

Diversification Opportunities for JB Chemicals and Modi Rubber

0.89

Correlation Coefficient

JB Chemicals  Modi Rubber

Very poor diversification

The 3 months correlation between JBCHEPHARM and Modi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding JB Chemicals Pharmaceuticals and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber Limited 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 Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of JB Chemicals i.e., JB Chemicals and Modi Rubber go up and down completely randomly.

Pair Corralation between JB Chemicals and Modi Rubber

Assuming the 90 days trading horizon JB Chemicals Pharmaceuticals is expected to generate 0.77 times more return on investment than Modi Rubber. However, JB Chemicals Pharmaceuticals is 1.29 times less risky than Modi Rubber. It trades about -0.09 of its potential returns per unit of risk. Modi Rubber Limited is currently generating about -0.11 per unit of risk. If you would invest  186,108  in JB Chemicals Pharmaceuticals on December 28, 2024 and sell it today you would lose (24,538) from holding JB Chemicals Pharmaceuticals or give up 13.18% of portfolio value over 90 days.

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

JB Chemicals Pharmaceuticals  vs.  Modi Rubber Limited

JB Chemicals Pharmac

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Modi Rubber Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JB Chemicals and Modi Rubber

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

The idea behind JB Chemicals Pharmaceuticals and Modi Rubber 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 Commodity Directory module to find actively traded commodities issued by global exchanges.