Correlation Between Jubilant Foodworks and Vidhi Specialty

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

Diversification Opportunities for Jubilant Foodworks and Vidhi Specialty

0.48

Correlation Coefficient

Jubilant Foodworks  Vidhi Specialty

Very weak diversification

The 3 months correlation between Jubilant and Vidhi is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and Vidhi Specialty Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vidhi Specialty Food 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 Vidhi Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vidhi Specialty Food has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Vidhi Specialty go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Vidhi Specialty

Assuming the 90 days trading horizon Jubilant Foodworks is expected to generate 2.31 times less return on investment than Vidhi Specialty. But when comparing it to its historical volatility, Jubilant Foodworks Limited is 2.12 times less risky than Vidhi Specialty. It trades about 0.17 of its potential returns per unit of risk. Vidhi Specialty Food is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  47,510  in Vidhi Specialty Food on September 24, 2024 and sell it today you would earn a total of  6,840  from holding Vidhi Specialty Food or generate 14.4% return on investment over 90 days.

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

Jubilant Foodworks Limited  vs.  Vidhi Specialty Food

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 recent stock price disarray, may contribute to short-term losses for the investors.

Vidhi Specialty Food

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vidhi Specialty Food are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Vidhi Specialty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jubilant Foodworks and Vidhi Specialty

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

The idea behind Jubilant Foodworks Limited and Vidhi Specialty Food 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.