Correlation Between Taj GVK and Jindal Stainless

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

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

Diversification Opportunities for Taj GVK and Jindal Stainless

0.11

Correlation Coefficient

Taj GVK  Jindal Stainless

Average diversification

The 3 months correlation between Taj and Jindal is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless and Taj GVK 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 Taj GVK Hotels 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 Taj GVK i.e., Taj GVK and Jindal Stainless go up and down completely randomly.

Pair Corralation between Taj GVK and Jindal Stainless

Assuming the 90 days trading horizon Taj GVK Hotels is expected to generate 2.99 times more return on investment than Jindal Stainless. However, Taj GVK is 2.99 times more volatile than Jindal Stainless Limited. It trades about 0.13 of its potential returns per unit of risk. Jindal Stainless Limited is currently generating about 0.23 per unit of risk. If you would invest  35,140  in Taj GVK Hotels on October 1, 2024 and sell it today you would earn a total of  3,300  from holding Taj GVK Hotels or generate 9.39% return on investment over 90 days.

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

Taj GVK Hotels  vs.  Jindal Stainless Limited

Taj GVK Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Taj GVK sustained 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 rather sound technical and fundamental indicators, Jindal Stainless is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Taj GVK and Jindal Stainless

The main advantage of trading using opposite Taj GVK and Jindal Stainless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taj GVK 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 Taj GVK Hotels 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.