Correlation Between JB Chemicals and Sandhar Technologies

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

By analyzing existing cross correlation between JB Chemicals Pharmaceuticals and Sandhar Technologies Limited, you can compare the effects of market volatilities on JB Chemicals and Sandhar Technologies 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 JB Chemicals with a short position of Sandhar Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Chemicals and Sandhar Technologies.

Diversification Opportunities for JB Chemicals and Sandhar Technologies

-0.12

Correlation Coefficient

JB Chemicals  Sandhar Technologies

Good diversification

The 3 months correlation between JBCHEPHARM and Sandhar is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding JB Chemicals Pharmaceuticals and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar Technologies and JB Chemicals 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 JB Chemicals Pharmaceuticals are associated (or correlated) with Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of JB Chemicals i.e., JB Chemicals and Sandhar Technologies go up and down completely randomly.

Pair Corralation between JB Chemicals and Sandhar Technologies

Assuming the 90 days trading horizon JB Chemicals Pharmaceuticals is expected to generate 0.79 times more return on investment than Sandhar Technologies. However, JB Chemicals Pharmaceuticals is 1.27 times less risky than Sandhar Technologies. It trades about -0.02 of its potential returns per unit of risk. Sandhar Technologies Limited is currently generating about -0.03 per unit of risk. If you would invest  187,400  in JB Chemicals Pharmaceuticals on September 29, 2024 and sell it today you would lose (5,545) from holding JB Chemicals Pharmaceuticals or give up 2.96% of portfolio value over 90 days.

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

JB Chemicals Pharmaceuticals  vs.  Sandhar Technologies Limited

JB Chemicals Pharmac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JB Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, JB Chemicals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sandhar Technologies is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with JB Chemicals and Sandhar Technologies

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

The idea behind JB Chemicals Pharmaceuticals and Sandhar Technologies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.