Correlation Between Jubilant Foodworks and Consolidated Construction

Can any of the company-specific risk be diversified away by investing in both Jubilant Foodworks and Consolidated Construction 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 Jubilant Foodworks and Consolidated Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jubilant Foodworks Limited and Consolidated Construction Consortium, you can compare the effects of market volatilities on Jubilant Foodworks and Consolidated Construction 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 Jubilant Foodworks with a short position of Consolidated Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jubilant Foodworks and Consolidated Construction.

Diversification Opportunities for Jubilant Foodworks and Consolidated Construction

0.42

Correlation Coefficient

Jubilant Foodworks  Consolidated Construction

Very weak diversification

The 3 months correlation between Jubilant and Consolidated is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction and Jubilant Foodworks 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 Jubilant Foodworks Limited are associated (or correlated) with Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Consolidated Construction go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Consolidated Construction

Assuming the 90 days trading horizon Jubilant Foodworks Limited is expected to generate 0.69 times more return on investment than Consolidated Construction. However, Jubilant Foodworks Limited is 1.46 times less risky than Consolidated Construction. It trades about -0.03 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about -0.02 per unit of risk. If you would invest  71,875  in Jubilant Foodworks Limited on December 28, 2024 and sell it today you would lose (4,415) from holding Jubilant Foodworks Limited or give up 6.14% of portfolio value over 90 days.

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

Jubilant Foodworks Limited  vs.  Consolidated Construction Cons

Jubilant Foodworks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jubilant Foodworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jubilant Foodworks is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Consolidated Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consolidated Construction Consortium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Consolidated Construction is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Jubilant Foodworks and Consolidated Construction

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

The idea behind Jubilant Foodworks Limited and Consolidated Construction Consortium 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.