Correlation Between JGCHEMICALS and Maithan Alloys

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Can any of the company-specific risk be diversified away by investing in both JGCHEMICALS and Maithan Alloys 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 Maithan Alloys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JGCHEMICALS LIMITED and Maithan Alloys Limited, you can compare the effects of market volatilities on JGCHEMICALS and Maithan Alloys 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 Maithan Alloys. Check out your portfolio center. Please also check ongoing floating volatility patterns of JGCHEMICALS and Maithan Alloys.

Diversification Opportunities for JGCHEMICALS and Maithan Alloys

0.55
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between JGCHEMICALS and Maithan Alloys

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to under-perform the Maithan Alloys. But the stock apears to be less risky and, when comparing its historical volatility, JGCHEMICALS LIMITED is 1.03 times less risky than Maithan Alloys. The stock trades about -0.1 of its potential returns per unit of risk. The Maithan Alloys Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  106,240  in Maithan Alloys Limited on September 23, 2024 and sell it today you would earn a total of  10,920  from holding Maithan Alloys Limited or generate 10.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

JGCHEMICALS LIMITED  vs.  Maithan Alloys Limited

 Performance 
       Timeline  
JGCHEMICALS LIMITED 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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.
Maithan Alloys 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Maithan Alloys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maithan Alloys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

JGCHEMICALS and Maithan Alloys Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JGCHEMICALS and Maithan Alloys

The main advantage of trading using opposite JGCHEMICALS and Maithan Alloys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JGCHEMICALS position performs unexpectedly, Maithan Alloys 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 Maithan Alloys will offset losses from the drop in Maithan Alloys' long position.
The idea behind JGCHEMICALS LIMITED and Maithan Alloys 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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