Correlation Between JGCHEMICALS and Kalyani Steels

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

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

Diversification Opportunities for JGCHEMICALS and Kalyani Steels

0.46

Correlation Coefficient

JGCHEMICALS  Kalyani Steels

Very weak diversification

The 3 months correlation between JGCHEMICALS and Kalyani is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and Kalyani Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Steels 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 Kalyani Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Steels has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and Kalyani Steels go up and down completely randomly.

Pair Corralation between JGCHEMICALS and Kalyani Steels

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to under-perform the Kalyani Steels. But the stock apears to be less risky and, when comparing its historical volatility, JGCHEMICALS LIMITED is 1.71 times less risky than Kalyani Steels. The stock trades about -0.05 of its potential returns per unit of risk. The Kalyani Steels Limited is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  77,450  in Kalyani Steels Limited on September 26, 2024 and sell it today you would earn a total of  42,425  from holding Kalyani Steels Limited or generate 54.78% return on investment over 90 days.

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

JGCHEMICALS LIMITED  vs.  Kalyani Steels Limited

JGCHEMICALS LIMITED

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 3 (%) 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.

Kalyani Steels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JGCHEMICALS and Kalyani Steels

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

The idea behind JGCHEMICALS LIMITED and Kalyani Steels 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.