Correlation Between Jindal Poly and Fairchem Organics

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

By analyzing existing cross correlation between Jindal Poly Investment and Fairchem Organics Limited, you can compare the effects of market volatilities on Jindal Poly and Fairchem Organics 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 Jindal Poly with a short position of Fairchem Organics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jindal Poly and Fairchem Organics.

Diversification Opportunities for Jindal Poly and Fairchem Organics

-0.63

Correlation Coefficient

Jindal Poly  Fairchem Organics

Excellent diversification

The 3 months correlation between Jindal and Fairchem is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Poly Investment and Fairchem Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairchem Organics and Jindal Poly 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 Jindal Poly Investment are associated (or correlated) with Fairchem Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairchem Organics has no effect on the direction of Jindal Poly i.e., Jindal Poly and Fairchem Organics go up and down completely randomly.

Pair Corralation between Jindal Poly and Fairchem Organics

Assuming the 90 days trading horizon Jindal Poly Investment is expected to generate 1.13 times more return on investment than Fairchem Organics. However, Jindal Poly is 1.13 times more volatile than Fairchem Organics Limited. It trades about 0.06 of its potential returns per unit of risk. Fairchem Organics Limited is currently generating about 0.01 per unit of risk. If you would invest  46,120  in Jindal Poly Investment on September 19, 2024 and sell it today you would earn a total of  50,790  from holding Jindal Poly Investment or generate 110.13% return on investment over 90 days.

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

Jindal Poly Investment  vs.  Fairchem Organics Limited

Jindal Poly Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Poly Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Jindal Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Fairchem Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fairchem Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Fairchem Organics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jindal Poly and Fairchem Organics

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

The idea behind Jindal Poly Investment and Fairchem Organics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.