Correlation Between JSW Steel and JGCHEMICALS

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

Diversification Opportunities for JSW Steel and JGCHEMICALS

0.14

Correlation Coefficient

JSW Steel  JGCHEMICALS

Average diversification

The 3 months correlation between JSW and JGCHEMICALS is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and JGCHEMICALS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JGCHEMICALS LIMITED 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 JGCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JGCHEMICALS LIMITED has no effect on the direction of JSW Steel i.e., JSW Steel and JGCHEMICALS go up and down completely randomly.

Pair Corralation between JSW Steel and JGCHEMICALS

Assuming the 90 days trading horizon JSW Steel is expected to generate 7.01 times less return on investment than JGCHEMICALS. But when comparing it to its historical volatility, JSW Steel Limited is 2.69 times less risky than JGCHEMICALS. It trades about 0.04 of its potential returns per unit of risk. JGCHEMICALS LIMITED is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18,480  in JGCHEMICALS LIMITED on October 15, 2024 and sell it today you would earn a total of  18,425  from holding JGCHEMICALS LIMITED or generate 99.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.3%
Values	Daily Returns

JSW Steel Limited  vs.  JGCHEMICALS LIMITED

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.

JGCHEMICALS LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JGCHEMICALS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, JGCHEMICALS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JSW Steel and JGCHEMICALS

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

The idea behind JSW Steel Limited and JGCHEMICALS 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.