Correlation Between JGCHEMICALS and Embassy Office

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

By analyzing existing cross correlation between JGCHEMICALS LIMITED and Embassy Office Parks, you can compare the effects of market volatilities on JGCHEMICALS and Embassy Office 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 Embassy Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of JGCHEMICALS and Embassy Office.

Diversification Opportunities for JGCHEMICALS and Embassy Office

-0.57

Correlation Coefficient

JGCHEMICALS  Embassy Office

Excellent diversification

The 3 months correlation between JGCHEMICALS and Embassy is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and Embassy Office Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Office Parks 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 Embassy Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Office Parks has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and Embassy Office go up and down completely randomly.

Pair Corralation between JGCHEMICALS and Embassy Office

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to generate 4.79 times more return on investment than Embassy Office. However, JGCHEMICALS is 4.79 times more volatile than Embassy Office Parks. It trades about 0.22 of its potential returns per unit of risk. Embassy Office Parks is currently generating about -0.39 per unit of risk. If you would invest  35,550  in JGCHEMICALS LIMITED on September 4, 2024 and sell it today you would earn a total of  8,455  from holding JGCHEMICALS LIMITED or generate 23.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

JGCHEMICALS LIMITED  vs.  Embassy Office Parks

JGCHEMICALS LIMITED

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, JGCHEMICALS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JGCHEMICALS and Embassy Office

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

The idea behind JGCHEMICALS LIMITED and Embassy Office Parks 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.