Correlation Between JGCHEMICALS and KNR Constructions

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

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

Diversification Opportunities for JGCHEMICALS and KNR Constructions

0.89

Correlation Coefficient

JGCHEMICALS  KNR Constructions

Very poor diversification

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

Pair Corralation between JGCHEMICALS and KNR Constructions

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to generate 0.97 times more return on investment than KNR Constructions. However, JGCHEMICALS LIMITED is 1.03 times less risky than KNR Constructions. It trades about -0.12 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about -0.14 per unit of risk. If you would invest  40,985  in JGCHEMICALS LIMITED on December 27, 2024 and sell it today you would lose (9,850) from holding JGCHEMICALS LIMITED or give up 24.03% of portfolio value over 90 days.

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

JGCHEMICALS LIMITED  vs.  KNR Constructions Limited

JGCHEMICALS LIMITED

Risk-Adjusted Performance

Very Weak

Over the last 90 days JGCHEMICALS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators 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.

KNR Constructions

Risk-Adjusted Performance

Very Weak

Over the last 90 days KNR Constructions 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 indicators 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 JGCHEMICALS and KNR Constructions

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

The idea behind JGCHEMICALS LIMITED and KNR Constructions 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.