Correlation Between JSW Holdings and Azad Engineering

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

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

Diversification Opportunities for JSW Holdings and Azad Engineering

-0.25

Correlation Coefficient

JSW Holdings  Azad Engineering

Very good diversification

The 3 months correlation between JSW and Azad is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited and Azad Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azad Engineering and JSW Holdings 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 JSW Holdings Limited are associated (or correlated) with Azad Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azad Engineering has no effect on the direction of JSW Holdings i.e., JSW Holdings and Azad Engineering go up and down completely randomly.

Pair Corralation between JSW Holdings and Azad Engineering

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 0.83 times more return on investment than Azad Engineering. However, JSW Holdings Limited is 1.2 times less risky than Azad Engineering. It trades about 0.25 of its potential returns per unit of risk. Azad Engineering Limited is currently generating about -0.05 per unit of risk. If you would invest  1,414,720  in JSW Holdings Limited on December 22, 2024 and sell it today you would earn a total of  880,745  from holding JSW Holdings Limited or generate 62.26% return on investment over 90 days.

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

JSW Holdings Limited  vs.  Azad Engineering Limited

JSW Holdings Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Azad Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azad Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with JSW Holdings and Azad Engineering

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

The idea behind JSW Holdings Limited and Azad Engineering 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.