Correlation Between NIFTY SUMER and Jyoti CNC

Can any of the company-specific risk be diversified away by investing in both NIFTY SUMER and Jyoti CNC 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 NIFTY SUMER and Jyoti CNC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIFTY SUMER DURABLES and Jyoti CNC Automation, you can compare the effects of market volatilities on NIFTY SUMER and Jyoti CNC 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 NIFTY SUMER with a short position of Jyoti CNC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIFTY SUMER and Jyoti CNC.

Diversification Opportunities for NIFTY SUMER and Jyoti CNC

0.29

Correlation Coefficient

NIFTY SUMER  Jyoti CNC

Modest diversification

The 3 months correlation between NIFTY and Jyoti is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Jyoti CNC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jyoti CNC Automation and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Jyoti CNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jyoti CNC Automation has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Jyoti CNC go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Jyoti CNC

Assuming the 90 days trading horizon NIFTY SUMER is expected to generate 2.15 times less return on investment than Jyoti CNC. But when comparing it to its historical volatility, NIFTY SUMER DURABLES is 3.04 times less risky than Jyoti CNC. It trades about 0.11 of its potential returns per unit of risk. Jyoti CNC Automation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  100,860  in Jyoti CNC Automation on September 28, 2024 and sell it today you would earn a total of  36,000  from holding Jyoti CNC Automation or generate 35.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.31%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  Jyoti CNC Automation

Pair Trading with NIFTY SUMER and Jyoti CNC

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

The idea behind NIFTY SUMER DURABLES and Jyoti CNC Automation 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 Valuation module to check real value of public entities based on technical and fundamental data.