Correlation Between JSW Holdings and Univa Foods

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

Diversification Opportunities for JSW Holdings and Univa Foods

0.83

Correlation Coefficient

JSW Holdings  Univa Foods

Very poor diversification

The 3 months correlation between JSW and Univa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited and Univa Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univa Foods Limited 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 Univa Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univa Foods Limited has no effect on the direction of JSW Holdings i.e., JSW Holdings and Univa Foods go up and down completely randomly.

Pair Corralation between JSW Holdings and Univa Foods

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 5.93 times more return on investment than Univa Foods. However, JSW Holdings is 5.93 times more volatile than Univa Foods Limited. It trades about 0.22 of its potential returns per unit of risk. Univa Foods Limited is currently generating about 0.18 per unit of risk. If you would invest  758,940  in JSW Holdings Limited on September 5, 2024 and sell it today you would earn a total of  686,175  from holding JSW Holdings Limited or generate 90.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

JSW Holdings Limited  vs.  Univa Foods Limited

JSW Holdings Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 17 (%) 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.

Univa Foods Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Univa Foods Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Univa Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JSW Holdings and Univa Foods

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

The idea behind JSW Holdings Limited and Univa Foods 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.