Correlation Between JSW Steel and JB Chemicals

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

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

Diversification Opportunities for JSW Steel and JB Chemicals

-0.12

Correlation Coefficient

JSW Steel  JB Chemicals

Good diversification

The 3 months correlation between JSW and JBCHEPHARM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and JB Chemicals Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Chemicals Pharmac and JSW Steel 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 Steel Limited are associated (or correlated) with JB Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Chemicals Pharmac has no effect on the direction of JSW Steel i.e., JSW Steel and JB Chemicals go up and down completely randomly.

Pair Corralation between JSW Steel and JB Chemicals

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the JB Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, JSW Steel Limited is 1.28 times less risky than JB Chemicals. The stock trades about -0.16 of its potential returns per unit of risk. The JB Chemicals Pharmaceuticals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  189,000  in JB Chemicals Pharmaceuticals on October 7, 2024 and sell it today you would lose (2,240) from holding JB Chemicals Pharmaceuticals or give up 1.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

JSW Steel Limited  vs.  JB Chemicals Pharmaceuticals

JSW Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

JB Chemicals Pharmac

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JB Chemicals Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, JB Chemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JSW Steel and JB Chemicals

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

The idea behind JSW Steel Limited and JB Chemicals Pharmaceuticals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.