Correlation Between Jubilant Foodworks and Jindal Stainless

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

Diversification Opportunities for Jubilant Foodworks and Jindal Stainless

-0.08

Correlation Coefficient

Jubilant Foodworks  Jindal Stainless

Good diversification

The 3 months correlation between Jubilant and Jindal is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless 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 Jindal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Stainless has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Jindal Stainless go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Jindal Stainless

Assuming the 90 days trading horizon Jubilant Foodworks Limited is expected to generate 0.8 times more return on investment than Jindal Stainless. However, Jubilant Foodworks Limited is 1.24 times less risky than Jindal Stainless. It trades about 0.07 of its potential returns per unit of risk. Jindal Stainless Limited is currently generating about 0.04 per unit of risk. If you would invest  51,209  in Jubilant Foodworks Limited on October 22, 2024 and sell it today you would earn a total of  18,061  from holding Jubilant Foodworks Limited or generate 35.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Jubilant Foodworks Limited  vs.  Jindal Stainless Limited

Jubilant Foodworks

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Stainless Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jindal Stainless is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jubilant Foodworks and Jindal Stainless

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

The idea behind Jubilant Foodworks Limited and Jindal Stainless 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.