Correlation Between JS Investments and Sitara Chemical

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

By analyzing existing cross correlation between JS Investments and Sitara Chemical Industries, you can compare the effects of market volatilities on JS Investments and Sitara Chemical 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 JS Investments with a short position of Sitara Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of JS Investments and Sitara Chemical.

Diversification Opportunities for JS Investments and Sitara Chemical

-0.32

Correlation Coefficient

JS Investments  Sitara Chemical

Very good diversification

The 3 months correlation between JSIL and Sitara is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and Sitara Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitara Chemical Indu and JS Investments 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 JS Investments are associated (or correlated) with Sitara Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitara Chemical Indu has no effect on the direction of JS Investments i.e., JS Investments and Sitara Chemical go up and down completely randomly.

Pair Corralation between JS Investments and Sitara Chemical

Assuming the 90 days trading horizon JS Investments is expected to under-perform the Sitara Chemical. In addition to that, JS Investments is 1.37 times more volatile than Sitara Chemical Industries. It trades about -0.04 of its total potential returns per unit of risk. Sitara Chemical Industries is currently generating about 0.17 per unit of volatility. If you would invest  29,578  in Sitara Chemical Industries on December 22, 2024 and sell it today you would earn a total of  7,882  from holding Sitara Chemical Industries or generate 26.65% return on investment over 90 days.

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

JS Investments  vs.  Sitara Chemical Industries

JS Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days JS Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sitara Chemical Indu

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sitara Chemical Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Sitara Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JS Investments and Sitara Chemical

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

The idea behind JS Investments and Sitara Chemical Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.