Correlation Between Jindal Stainless and Chembond Chemicals

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

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

Diversification Opportunities for Jindal Stainless and Chembond Chemicals

0.26

Correlation Coefficient

Jindal Stainless  Chembond Chemicals

Modest diversification

The 3 months correlation between Jindal and Chembond is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Stainless Limited and Chembond Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembond Chemicals and Jindal Stainless 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 Stainless Limited are associated (or correlated) with Chembond Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembond Chemicals has no effect on the direction of Jindal Stainless i.e., Jindal Stainless and Chembond Chemicals go up and down completely randomly.

Pair Corralation between Jindal Stainless and Chembond Chemicals

Assuming the 90 days trading horizon Jindal Stainless Limited is expected to generate 0.82 times more return on investment than Chembond Chemicals. However, Jindal Stainless Limited is 1.22 times less risky than Chembond Chemicals. It trades about 0.03 of its potential returns per unit of risk. Chembond Chemicals is currently generating about 0.02 per unit of risk. If you would invest  58,841  in Jindal Stainless Limited on October 10, 2024 and sell it today you would earn a total of  5,704  from holding Jindal Stainless Limited or generate 9.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Jindal Stainless Limited  vs.  Chembond Chemicals

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Stainless Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Chembond Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jindal Stainless and Chembond Chemicals

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

The idea behind Jindal Stainless Limited and Chembond Chemicals 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.