Correlation Between Privi Speciality and Jindal Stainless

Can any of the company-specific risk be diversified away by investing in both Privi Speciality and Jindal Stainless 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 Privi Speciality and Jindal Stainless into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Privi Speciality and Jindal Stainless

-0.4

Correlation Coefficient

Privi Speciality  Jindal Stainless

Very good diversification

The 3 months correlation between Privi and Jindal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Privi Speciality Chemicals and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless and Privi Speciality 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 Privi Speciality Chemicals are associated (or correlated) with Jindal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Stainless has no effect on the direction of Privi Speciality i.e., Privi Speciality and Jindal Stainless go up and down completely randomly.

Pair Corralation between Privi Speciality and Jindal Stainless

Assuming the 90 days trading horizon Privi Speciality Chemicals is expected to under-perform the Jindal Stainless. But the stock apears to be less risky and, when comparing its historical volatility, Privi Speciality Chemicals is 1.15 times less risky than Jindal Stainless. The stock trades about -0.21 of its potential returns per unit of risk. The Jindal Stainless Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  71,600  in Jindal Stainless Limited on October 4, 2024 and sell it today you would lose (1,700) from holding Jindal Stainless Limited or give up 2.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Privi Speciality Chemicals  vs.  Jindal Stainless Limited

Privi Speciality Che

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Privi Speciality Chemicals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Privi Speciality exhibited solid returns over the last few months and may actually be approaching a breakup point.

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Stainless Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Privi Speciality and Jindal Stainless

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

The idea behind Privi Speciality Chemicals and Jindal Stainless 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.