Correlation Between Oil India and JB Chemicals

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

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

Diversification Opportunities for Oil India and JB Chemicals

-0.11

Correlation Coefficient

Oil India  JB Chemicals

Good diversification

The 3 months correlation between Oil and JBCHEPHARM is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Oil India 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 Oil India 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 Oil India 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 Oil India i.e., Oil India and JB Chemicals go up and down completely randomly.

Pair Corralation between Oil India and JB Chemicals

Assuming the 90 days trading horizon Oil India Limited is expected to generate 1.83 times more return on investment than JB Chemicals. However, Oil India is 1.83 times more volatile than JB Chemicals Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about 0.0 per unit of risk. If you would invest  42,705  in Oil India Limited on October 26, 2024 and sell it today you would earn a total of  2,425  from holding Oil India Limited or generate 5.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Oil India Limited  vs.  JB Chemicals Pharmaceuticals

Oil India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Oil India is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

JB Chemicals Pharmac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JB Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, JB Chemicals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Oil India and JB Chemicals

The main advantage of trading using opposite Oil India and JB Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil India 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 Oil India 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.