Correlation Between Jubilant Foodworks and Mangalore Chemicals

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

Diversification Opportunities for Jubilant Foodworks and Mangalore Chemicals

0.75

Correlation Coefficient

Jubilant Foodworks  Mangalore Chemicals

Poor diversification

The 3 months correlation between Jubilant and Mangalore is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore 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 Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Mangalore Chemicals

Assuming the 90 days trading horizon Jubilant Foodworks is expected to generate 1.75 times less return on investment than Mangalore Chemicals. But when comparing it to its historical volatility, Jubilant Foodworks Limited is 1.53 times less risky than Mangalore Chemicals. It trades about 0.05 of its potential returns per unit of risk. Mangalore Chemicals Fertilizers is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,191  in Mangalore Chemicals Fertilizers on October 2, 2024 and sell it today you would earn a total of  7,162  from holding Mangalore Chemicals Fertilizers or generate 87.44% return on investment over 90 days.

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

Jubilant Foodworks Limited  vs.  Mangalore Chemicals Fertilizer

Jubilant Foodworks

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

Mangalore Chemicals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jubilant Foodworks and Mangalore Chemicals

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

The idea behind Jubilant Foodworks Limited and Mangalore Chemicals Fertilizers 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.