Correlation Between Gujarat Narmada and Jindal Stainless

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

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

Diversification Opportunities for Gujarat Narmada and Jindal Stainless

0.6

Correlation Coefficient

Gujarat Narmada  Jindal Stainless

Poor diversification

The 3 months correlation between Gujarat and Jindal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless and Gujarat Narmada 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 Narmada Valley 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 Gujarat Narmada i.e., Gujarat Narmada and Jindal Stainless go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Jindal Stainless

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the Jindal Stainless. In addition to that, Gujarat Narmada is 1.05 times more volatile than Jindal Stainless Limited. It trades about -0.11 of its total potential returns per unit of risk. Jindal Stainless Limited is currently generating about -0.04 per unit of volatility. If you would invest  77,800  in Jindal Stainless Limited on September 27, 2024 and sell it today you would lose (4,795) from holding Jindal Stainless Limited or give up 6.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Gujarat Narmada Valley  vs.  Jindal Stainless Limited

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Narmada Valley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gujarat Narmada and Jindal Stainless

The main advantage of trading using opposite Gujarat Narmada and Jindal Stainless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Narmada 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 Gujarat Narmada Valley 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.