Correlation Between GM Breweries and Jindal Drilling

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

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

Diversification Opportunities for GM Breweries and Jindal Drilling

-0.43

Correlation Coefficient

GM Breweries  Jindal Drilling

Very good diversification

The 3 months correlation between GMBREW and Jindal is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Jindal Drilling And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Drilling And and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Jindal Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Drilling And has no effect on the direction of GM Breweries i.e., GM Breweries and Jindal Drilling go up and down completely randomly.

Pair Corralation between GM Breweries and Jindal Drilling

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the Jindal Drilling. In addition to that, GM Breweries is 1.12 times more volatile than Jindal Drilling And. It trades about 0.0 of its total potential returns per unit of risk. Jindal Drilling And is currently generating about 0.14 per unit of volatility. If you would invest  67,375  in Jindal Drilling And on September 4, 2024 and sell it today you would earn a total of  15,425  from holding Jindal Drilling And or generate 22.89% return on investment over 90 days.

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

GM Breweries Limited  vs.  Jindal Drilling And

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Jindal Drilling And

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Drilling And are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward indicators, Jindal Drilling disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM Breweries and Jindal Drilling

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

The idea behind GM Breweries Limited and Jindal Drilling And 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.