Correlation Between Ami Organics and Jubilant Foodworks

Can any of the company-specific risk be diversified away by investing in both Ami Organics and Jubilant Foodworks 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 Ami Organics and Jubilant Foodworks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ami Organics Limited and Jubilant Foodworks Limited, you can compare the effects of market volatilities on Ami Organics and Jubilant Foodworks 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 Ami Organics with a short position of Jubilant Foodworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ami Organics and Jubilant Foodworks.

Diversification Opportunities for Ami Organics and Jubilant Foodworks

-0.11

Correlation Coefficient

Ami Organics  Jubilant Foodworks

Good diversification

The 3 months correlation between Ami and Jubilant is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ami Organics Limited and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks and Ami Organics 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 Ami Organics Limited are associated (or correlated) with Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of Ami Organics i.e., Ami Organics and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Ami Organics and Jubilant Foodworks

Assuming the 90 days trading horizon Ami Organics Limited is expected to generate 1.69 times more return on investment than Jubilant Foodworks. However, Ami Organics is 1.69 times more volatile than Jubilant Foodworks Limited. It trades about 0.22 of its potential returns per unit of risk. Jubilant Foodworks Limited is currently generating about 0.05 per unit of risk. If you would invest  145,645  in Ami Organics Limited on September 12, 2024 and sell it today you would earn a total of  76,085  from holding Ami Organics Limited or generate 52.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ami Organics Limited  vs.  Jubilant Foodworks Limited

Ami Organics Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ami Organics Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Ami Organics sustained solid returns over the last few months and may actually be approaching a breakup point.

Jubilant Foodworks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilant Foodworks Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Jubilant Foodworks is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ami Organics and Jubilant Foodworks

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

The idea behind Ami Organics Limited and Jubilant Foodworks 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.