Correlation Between Jubilant Foodworks and Reliance Industrial

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

Diversification Opportunities for Jubilant Foodworks and Reliance Industrial

0.62

Correlation Coefficient

Jubilant Foodworks  Reliance Industrial

Poor diversification

The 3 months correlation between Jubilant and Reliance is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Reliance Industrial Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industrial 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 Reliance Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industrial has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Reliance Industrial go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Reliance Industrial

Assuming the 90 days trading horizon Jubilant Foodworks Limited is expected to under-perform the Reliance Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Jubilant Foodworks Limited is 1.89 times less risky than Reliance Industrial. The stock trades about -0.02 of its potential returns per unit of risk. The Reliance Industrial Infrastructure is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  116,255  in Reliance Industrial Infrastructure on September 20, 2024 and sell it today you would lose (3,135) from holding Reliance Industrial Infrastructure or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Jubilant Foodworks Limited  vs.  Reliance Industrial Infrastruc

Jubilant Foodworks

Risk-Adjusted Performance

0 of 100

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.

Reliance Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industrial Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Reliance Industrial 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 Reliance Industrial

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

The idea behind Jubilant Foodworks Limited and Reliance Industrial Infrastructure 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.