Correlation Between Jubilant Foodworks and Western India

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

Diversification Opportunities for Jubilant Foodworks and Western India

0.83

Correlation Coefficient

Jubilant Foodworks  Western India

Very poor diversification

The 3 months correlation between Jubilant and Western is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks Limited and The Western India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western India 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 Western India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western India has no effect on the direction of Jubilant Foodworks i.e., Jubilant Foodworks and Western India go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and Western India

Assuming the 90 days trading horizon Jubilant Foodworks is expected to generate 1.01 times less return on investment than Western India. But when comparing it to its historical volatility, Jubilant Foodworks Limited is 1.7 times less risky than Western India. It trades about 0.24 of its potential returns per unit of risk. The Western India is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  22,103  in The Western India on October 8, 2024 and sell it today you would earn a total of  1,815  from holding The Western India or generate 8.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Jubilant Foodworks Limited  vs.  The Western India

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 weak basic indicators, Jubilant Foodworks displayed solid returns over the last few months and may actually be approaching a breakup point.

Western India

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Western India are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Western India unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jubilant Foodworks and Western India

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

The idea behind Jubilant Foodworks Limited and The Western India 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.