Correlation Between JM Financial and Edelweiss Financial

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

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

Diversification Opportunities for JM Financial and Edelweiss Financial

0.34

Correlation Coefficient

JM Financial  Edelweiss Financial

Weak diversification

The 3 months correlation between JMFINANCIL and Edelweiss is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding JM Financial Limited and Edelweiss Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edelweiss Financial and JM Financial 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 JM Financial Limited are associated (or correlated) with Edelweiss Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edelweiss Financial has no effect on the direction of JM Financial i.e., JM Financial and Edelweiss Financial go up and down completely randomly.

Pair Corralation between JM Financial and Edelweiss Financial

Assuming the 90 days trading horizon JM Financial Limited is expected to generate 0.88 times more return on investment than Edelweiss Financial. However, JM Financial Limited is 1.14 times less risky than Edelweiss Financial. It trades about 0.12 of its potential returns per unit of risk. Edelweiss Financial Services is currently generating about 0.07 per unit of risk. If you would invest  10,796  in JM Financial Limited on September 2, 2024 and sell it today you would earn a total of  2,853  from holding JM Financial Limited or generate 26.43% return on investment over 90 days.

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

JM Financial Limited  vs.  Edelweiss Financial Services

JM Financial Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Edelweiss Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edelweiss Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Edelweiss Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JM Financial and Edelweiss Financial

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

The idea behind JM Financial Limited and Edelweiss Financial Services 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.