Correlation Between Jubilant Foodworks and Hindcon Chemicals

Can any of the company-specific risk be diversified away by investing in both Jubilant Foodworks and Hindcon 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 Jubilant Foodworks and Hindcon Chemicals 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 Hindcon Chemicals Limited, you can compare the effects of market volatilities on Jubilant Foodworks and Hindcon 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 Jubilant Foodworks with a short position of Hindcon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jubilant Foodworks and Hindcon Chemicals.

Diversification Opportunities for Jubilant Foodworks and Hindcon Chemicals

0.17

Correlation Coefficient

Jubilant Foodworks  Hindcon Chemicals

Average diversification

The 3 months correlation between Jubilant and Hindcon is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Hindcon Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindcon Chemicals 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 Hindcon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindcon Chemicals has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Hindcon Chemicals go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Hindcon Chemicals

Assuming the 90 days trading horizon Jubilant Foodworks Limited is expected to generate 1.63 times more return on investment than Hindcon Chemicals. However, Jubilant Foodworks is 1.63 times more volatile than Hindcon Chemicals Limited. It trades about 0.32 of its potential returns per unit of risk. Hindcon Chemicals Limited is currently generating about -0.54 per unit of risk. If you would invest  66,205  in Jubilant Foodworks Limited on October 6, 2024 and sell it today you would earn a total of  9,705  from holding Jubilant Foodworks Limited or generate 14.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Jubilant Foodworks Limited  vs.  Hindcon Chemicals Limited

Jubilant Foodworks

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

Hindcon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jubilant Foodworks and Hindcon Chemicals

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

The idea behind Jubilant Foodworks Limited and Hindcon Chemicals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.