Correlation Between JSW Holdings and Servotech Power

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

Diversification Opportunities for JSW Holdings and Servotech Power

-0.32

Correlation Coefficient

JSW Holdings  Servotech Power

Very good diversification

The 3 months correlation between JSW and Servotech is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems 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 Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of JSW Holdings i.e., JSW Holdings and Servotech Power go up and down completely randomly.

Pair Corralation between JSW Holdings and Servotech Power

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 1.13 times more return on investment than Servotech Power. However, JSW Holdings is 1.13 times more volatile than Servotech Power Systems. It trades about 0.14 of its potential returns per unit of risk. Servotech Power Systems is currently generating about 0.14 per unit of risk. If you would invest  672,910  in JSW Holdings Limited on September 24, 2024 and sell it today you would earn a total of  768,935  from holding JSW Holdings Limited or generate 114.27% 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.  Servotech Power Systems

JSW Holdings Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 13 (%) 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.

Servotech Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Servotech Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with JSW Holdings and Servotech Power

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

The idea behind JSW Holdings Limited and Servotech Power Systems 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.