Correlation Between Gujarat Fluorochemicals and Jayant Agro

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Jayant Agro

0.35

Correlation Coefficient

Gujarat Fluorochemicals  Jayant Agro

Weak diversification

The 3 months correlation between Gujarat and Jayant is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Jayant Agro Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jayant Agro Organics and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited are associated (or correlated) with Jayant Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jayant Agro Organics has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Jayant Agro go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Jayant Agro

Assuming the 90 days trading horizon Gujarat Fluorochemicals is expected to generate 1.38 times less return on investment than Jayant Agro. But when comparing it to its historical volatility, Gujarat Fluorochemicals Limited is 1.15 times less risky than Jayant Agro. It trades about 0.05 of its potential returns per unit of risk. Jayant Agro Organics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  15,670  in Jayant Agro Organics on September 13, 2024 and sell it today you would earn a total of  14,045  from holding Jayant Agro Organics or generate 89.63% return on investment over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  Jayant Agro Organics

Gujarat Fluorochemicals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Gujarat Fluorochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Gujarat Fluorochemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Jayant Agro Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jayant Agro Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jayant Agro is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gujarat Fluorochemicals and Jayant Agro

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

The idea behind Gujarat Fluorochemicals Limited and Jayant Agro Organics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.