Correlation Between JGCHEMICALS and Maharashtra Scooters

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

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

Diversification Opportunities for JGCHEMICALS and Maharashtra Scooters

-0.55

Correlation Coefficient

JGCHEMICALS  Maharashtra Scooters

Excellent diversification

The 3 months correlation between JGCHEMICALS and Maharashtra is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters 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 Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between JGCHEMICALS and Maharashtra Scooters

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to generate 1.87 times more return on investment than Maharashtra Scooters. However, JGCHEMICALS is 1.87 times more volatile than Maharashtra Scooters Limited. It trades about 0.08 of its potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about -0.07 per unit of risk. If you would invest  36,750  in JGCHEMICALS LIMITED on October 7, 2024 and sell it today you would earn a total of  3,940  from holding JGCHEMICALS LIMITED or generate 10.72% return on investment over 90 days.

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

JGCHEMICALS LIMITED  vs.  Maharashtra Scooters Limited

JGCHEMICALS LIMITED

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, JGCHEMICALS sustained solid returns over the last few months and may actually be approaching a breakup point.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with JGCHEMICALS and Maharashtra Scooters

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

The idea behind JGCHEMICALS LIMITED and Maharashtra Scooters 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.