Correlation Between DCM Financial and JGCHEMICALS

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

By analyzing existing cross correlation between DCM Financial Services and JGCHEMICALS LIMITED, you can compare the effects of market volatilities on DCM Financial and JGCHEMICALS 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 DCM Financial with a short position of JGCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCM Financial and JGCHEMICALS.

Diversification Opportunities for DCM Financial and JGCHEMICALS

0.04

Correlation Coefficient

DCM Financial  JGCHEMICALS

Significant diversification

The 3 months correlation between DCM and JGCHEMICALS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding DCM Financial Services and JGCHEMICALS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JGCHEMICALS LIMITED and DCM Financial 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 DCM Financial Services are associated (or correlated) with JGCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JGCHEMICALS LIMITED has no effect on the direction of DCM Financial i.e., DCM Financial and JGCHEMICALS go up and down completely randomly.

Pair Corralation between DCM Financial and JGCHEMICALS

Assuming the 90 days trading horizon DCM Financial is expected to generate 3.5 times less return on investment than JGCHEMICALS. But when comparing it to its historical volatility, DCM Financial Services is 1.23 times less risky than JGCHEMICALS. It trades about 0.04 of its potential returns per unit of risk. JGCHEMICALS LIMITED is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  18,480  in JGCHEMICALS LIMITED on September 20, 2024 and sell it today you would earn a total of  24,375  from holding JGCHEMICALS LIMITED or generate 131.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	38.93%
Values	Daily Returns

DCM Financial Services  vs.  JGCHEMICALS LIMITED

DCM Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCM Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, DCM Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

JGCHEMICALS LIMITED

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, JGCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DCM Financial and JGCHEMICALS

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

The idea behind DCM Financial Services and JGCHEMICALS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.