Correlation Between Modi Rubber and JB Chemicals

Can any of the company-specific risk be diversified away by investing in both Modi Rubber and JB 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 Modi Rubber and JB Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Modi Rubber Limited and JB Chemicals Pharmaceuticals, you can compare the effects of market volatilities on Modi Rubber and JB 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 Modi Rubber with a short position of JB Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modi Rubber and JB Chemicals.

Diversification Opportunities for Modi Rubber and JB Chemicals

-0.37

Correlation Coefficient

Modi Rubber  JB Chemicals

Very good diversification

The 3 months correlation between Modi and JBCHEPHARM is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Modi Rubber Limited and JB Chemicals Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Chemicals Pharmac and Modi Rubber 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 Modi Rubber Limited are associated (or correlated) with JB Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Chemicals Pharmac has no effect on the direction of Modi Rubber i.e., Modi Rubber and JB Chemicals go up and down completely randomly.

Pair Corralation between Modi Rubber and JB Chemicals

Assuming the 90 days trading horizon Modi Rubber Limited is expected to under-perform the JB Chemicals. In addition to that, Modi Rubber is 1.15 times more volatile than JB Chemicals Pharmaceuticals. It trades about -0.05 of its total potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about 0.03 per unit of volatility. If you would invest  183,110  in JB Chemicals Pharmaceuticals on October 12, 2024 and sell it today you would earn a total of  3,920  from holding JB Chemicals Pharmaceuticals or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Modi Rubber Limited  vs.  JB Chemicals Pharmaceuticals

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Modi Rubber is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JB Chemicals Pharmac

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JB Chemicals Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, JB Chemicals is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Modi Rubber and JB Chemicals

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

The idea behind Modi Rubber Limited and JB Chemicals Pharmaceuticals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.