Correlation Between JGCHEMICALS and VA Tech

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

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

Diversification Opportunities for JGCHEMICALS and VA Tech

0.36

Correlation Coefficient

JGCHEMICALS  VA Tech

Weak diversification

The 3 months correlation between JGCHEMICALS and WABAG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag 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 VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and VA Tech go up and down completely randomly.

Pair Corralation between JGCHEMICALS and VA Tech

Assuming the 90 days trading horizon JGCHEMICALS is expected to generate 1.9 times less return on investment than VA Tech. In addition to that, JGCHEMICALS is 1.15 times more volatile than VA Tech Wabag. It trades about 0.02 of its total potential returns per unit of risk. VA Tech Wabag is currently generating about 0.04 per unit of volatility. If you would invest  154,440  in VA Tech Wabag on October 10, 2024 and sell it today you would earn a total of  6,080  from holding VA Tech Wabag or generate 3.94% return on investment over 90 days.

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

JGCHEMICALS LIMITED  vs.  VA Tech Wabag

JGCHEMICALS LIMITED

Risk-Adjusted Performance

1 of 100

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.

VA Tech Wabag

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VA Tech Wabag are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, VA Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JGCHEMICALS and VA Tech

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

The idea behind JGCHEMICALS LIMITED and VA Tech Wabag 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.