Correlation Between JGCHEMICALS and Kothari Petrochemicals

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

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

Diversification Opportunities for JGCHEMICALS and Kothari Petrochemicals

0.04

Correlation Coefficient

JGCHEMICALS  Kothari Petrochemicals

Significant diversification

The 3 months correlation between JGCHEMICALS and Kothari is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and Kothari Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kothari Petrochemicals 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 Kothari Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kothari Petrochemicals has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and Kothari Petrochemicals go up and down completely randomly.

Pair Corralation between JGCHEMICALS and Kothari Petrochemicals

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to generate 1.42 times more return on investment than Kothari Petrochemicals. However, JGCHEMICALS is 1.42 times more volatile than Kothari Petrochemicals Limited. It trades about 0.0 of its potential returns per unit of risk. Kothari Petrochemicals Limited is currently generating about -0.06 per unit of risk. If you would invest  38,015  in JGCHEMICALS LIMITED on October 23, 2024 and sell it today you would lose (1,805) from holding JGCHEMICALS LIMITED or give up 4.75% of portfolio value over 90 days.

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

JGCHEMICALS LIMITED  vs.  Kothari Petrochemicals Limited

JGCHEMICALS LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JGCHEMICALS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Kothari Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kothari Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with JGCHEMICALS and Kothari Petrochemicals

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

The idea behind JGCHEMICALS LIMITED and Kothari 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.