Correlation Between Reliance Industries and JB Chemicals

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

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

Diversification Opportunities for Reliance Industries and JB Chemicals

0.4

Correlation Coefficient

Reliance Industries  JB Chemicals

Very weak diversification

The 3 months correlation between Reliance and JBCHEPHARM is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries 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 Reliance Industries 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 Reliance Industries 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 Reliance Industries i.e., Reliance Industries and JB Chemicals go up and down completely randomly.

Pair Corralation between Reliance Industries and JB Chemicals

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 1.62 times more return on investment than JB Chemicals. However, Reliance Industries is 1.62 times more volatile than JB Chemicals Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about 0.05 per unit of risk. If you would invest  113,065  in Reliance Industries Limited on September 25, 2024 and sell it today you would earn a total of  9,165  from holding Reliance Industries Limited or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Reliance Industries Limited  vs.  JB Chemicals Pharmaceuticals

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm 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 newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Reliance Industries and JB Chemicals

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

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.