Correlation Between JGCHEMICALS and Elgi Rubber

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

By analyzing existing cross correlation between JGCHEMICALS LIMITED and Elgi Rubber, you can compare the effects of market volatilities on JGCHEMICALS and Elgi 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 JGCHEMICALS with a short position of Elgi Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of JGCHEMICALS and Elgi Rubber.

Diversification Opportunities for JGCHEMICALS and Elgi Rubber

0.27

Correlation Coefficient

JGCHEMICALS  Elgi Rubber

Modest diversification

The 3 months correlation between JGCHEMICALS and Elgi is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and Elgi Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elgi Rubber and JGCHEMICALS 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 JGCHEMICALS LIMITED are associated (or correlated) with Elgi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elgi Rubber has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and Elgi Rubber go up and down completely randomly.

Pair Corralation between JGCHEMICALS and Elgi Rubber

Assuming the 90 days trading horizon JGCHEMICALS is expected to generate 4.08 times less return on investment than Elgi Rubber. But when comparing it to its historical volatility, JGCHEMICALS LIMITED is 1.23 times less risky than Elgi Rubber. It trades about 0.03 of its potential returns per unit of risk. Elgi Rubber is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,177  in Elgi Rubber on September 21, 2024 and sell it today you would earn a total of  2,327  from holding Elgi Rubber or generate 22.87% return on investment over 90 days.

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

JGCHEMICALS LIMITED  vs.  Elgi Rubber

JGCHEMICALS LIMITED

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, JGCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Elgi Rubber

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Elgi Rubber sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JGCHEMICALS and Elgi Rubber

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

The idea behind JGCHEMICALS LIMITED and Elgi Rubber 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.