Correlation Between Power Mech and JSW Holdings

Can any of the company-specific risk be diversified away by investing in both Power Mech and JSW Holdings 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 Power Mech and JSW Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Mech Projects and JSW Holdings Limited, you can compare the effects of market volatilities on Power Mech and JSW Holdings 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 Power Mech with a short position of JSW Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Mech and JSW Holdings.

Diversification Opportunities for Power Mech and JSW Holdings

-0.7

Correlation Coefficient

Power Mech  JSW Holdings

Excellent diversification

The 3 months correlation between Power and JSW is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Power Mech Projects and JSW Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Holdings Limited and Power Mech 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 Power Mech Projects are associated (or correlated) with JSW Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Holdings Limited has no effect on the direction of Power Mech i.e., Power Mech and JSW Holdings go up and down completely randomly.

Pair Corralation between Power Mech and JSW Holdings

Assuming the 90 days trading horizon Power Mech Projects is expected to generate 2.04 times more return on investment than JSW Holdings. However, Power Mech is 2.04 times more volatile than JSW Holdings Limited. It trades about 0.06 of its potential returns per unit of risk. JSW Holdings Limited is currently generating about 0.12 per unit of risk. If you would invest  109,020  in Power Mech Projects on October 13, 2024 and sell it today you would earn a total of  165,790  from holding Power Mech Projects or generate 152.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

Power Mech Projects  vs.  JSW Holdings Limited

Power Mech Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Mech Projects has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

JSW Holdings Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Mech and JSW Holdings

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

The idea behind Power Mech Projects and JSW Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.