Correlation Between Rainbow Childrens and Jindal Stainless

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

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

Diversification Opportunities for Rainbow Childrens and Jindal Stainless

0.35

Correlation Coefficient

Rainbow Childrens  Jindal Stainless

Weak diversification

The 3 months correlation between Rainbow and Jindal is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rainbow Childrens Medicare and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless and Rainbow Childrens 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 Rainbow Childrens Medicare 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 Rainbow Childrens i.e., Rainbow Childrens and Jindal Stainless go up and down completely randomly.

Pair Corralation between Rainbow Childrens and Jindal Stainless

Assuming the 90 days trading horizon Rainbow Childrens Medicare is expected to generate 0.9 times more return on investment than Jindal Stainless. However, Rainbow Childrens Medicare is 1.11 times less risky than Jindal Stainless. It trades about -0.03 of its potential returns per unit of risk. Jindal Stainless Limited is currently generating about -0.1 per unit of risk. If you would invest  148,855  in Rainbow Childrens Medicare on December 30, 2024 and sell it today you would lose (8,685) from holding Rainbow Childrens Medicare or give up 5.83% of portfolio value over 90 days.

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

Rainbow Childrens Medicare  vs.  Jindal Stainless Limited

Rainbow Childrens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rainbow Childrens Medicare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, Rainbow Childrens is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Jindal Stainless

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rainbow Childrens and Jindal Stainless

The main advantage of trading using opposite Rainbow Childrens and Jindal Stainless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rainbow Childrens 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 Rainbow Childrens Medicare 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.