Correlation Between Motilal Oswal and JM Financial

Can any of the company-specific risk be diversified away by investing in both Motilal Oswal and JM Financial 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 Motilal Oswal and JM Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Motilal Oswal Financial and JM Financial Limited, you can compare the effects of market volatilities on Motilal Oswal and JM Financial 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 Motilal Oswal with a short position of JM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motilal Oswal and JM Financial.

Diversification Opportunities for Motilal Oswal and JM Financial

0.36

Correlation Coefficient

Motilal Oswal  JM Financial

Weak diversification

The 3 months correlation between Motilal and JMFINANCIL is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Motilal Oswal Financial and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Motilal Oswal 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 Motilal Oswal Financial are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Motilal Oswal i.e., Motilal Oswal and JM Financial go up and down completely randomly.

Pair Corralation between Motilal Oswal and JM Financial

Assuming the 90 days trading horizon Motilal Oswal Financial is expected to generate 1.06 times more return on investment than JM Financial. However, Motilal Oswal is 1.06 times more volatile than JM Financial Limited. It trades about 0.12 of its potential returns per unit of risk. JM Financial Limited is currently generating about 0.1 per unit of risk. If you would invest  75,890  in Motilal Oswal Financial on September 3, 2024 and sell it today you would earn a total of  18,720  from holding Motilal Oswal Financial or generate 24.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Motilal Oswal Financial  vs.  JM Financial Limited

Motilal Oswal Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motilal Oswal Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Motilal Oswal disclosed solid returns over the last few months and may actually be approaching a breakup point.

JM Financial Limited

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Motilal Oswal and JM Financial

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

The idea behind Motilal Oswal Financial and JM Financial Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.