Correlation Between JSW Holdings and Bombay Burmah

Can any of the company-specific risk be diversified away by investing in both JSW Holdings and Bombay Burmah 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 Bombay Burmah 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 Bombay Burmah Trading, you can compare the effects of market volatilities on JSW Holdings and Bombay Burmah 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 Bombay Burmah. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSW Holdings and Bombay Burmah.

Diversification Opportunities for JSW Holdings and Bombay Burmah

-0.56

Correlation Coefficient

JSW Holdings  Bombay Burmah

Excellent diversification

The 3 months correlation between JSW and Bombay is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited and Bombay Burmah Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombay Burmah Trading 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 Bombay Burmah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombay Burmah Trading has no effect on the direction of JSW Holdings i.e., JSW Holdings and Bombay Burmah go up and down completely randomly.

Pair Corralation between JSW Holdings and Bombay Burmah

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 2.37 times more return on investment than Bombay Burmah. However, JSW Holdings is 2.37 times more volatile than Bombay Burmah Trading. It trades about 0.26 of its potential returns per unit of risk. Bombay Burmah Trading is currently generating about -0.13 per unit of risk. If you would invest  832,915  in JSW Holdings Limited on October 8, 2024 and sell it today you would earn a total of  943,625  from holding JSW Holdings Limited or generate 113.29% return on investment over 90 days.

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

JSW Holdings Limited  vs.  Bombay Burmah Trading

JSW Holdings Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Bombay Burmah Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombay Burmah Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with JSW Holdings and Bombay Burmah

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

The idea behind JSW Holdings Limited and Bombay Burmah Trading 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.