Correlation Between JGCHEMICALS and Salzer Electronics

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

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

Diversification Opportunities for JGCHEMICALS and Salzer Electronics

0.42

Correlation Coefficient

JGCHEMICALS  Salzer Electronics

Very weak diversification

The 3 months correlation between JGCHEMICALS and Salzer is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED and Salzer Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzer Electronics and JGCHEMICALS 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 JGCHEMICALS LIMITED are associated (or correlated) with Salzer Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzer Electronics has no effect on the direction of JGCHEMICALS i.e., JGCHEMICALS and Salzer Electronics go up and down completely randomly.

Pair Corralation between JGCHEMICALS and Salzer Electronics

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to generate 1.27 times more return on investment than Salzer Electronics. However, JGCHEMICALS is 1.27 times more volatile than Salzer Electronics Limited. It trades about 0.12 of its potential returns per unit of risk. Salzer Electronics Limited is currently generating about 0.13 per unit of risk. If you would invest  18,480  in JGCHEMICALS LIMITED on September 23, 2024 and sell it today you would earn a total of  22,310  from holding JGCHEMICALS LIMITED or generate 120.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	39.55%
Values	Daily Returns

JGCHEMICALS LIMITED  vs.  Salzer Electronics Limited

JGCHEMICALS LIMITED

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, JGCHEMICALS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Salzer Electronics

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salzer Electronics Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Salzer Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JGCHEMICALS and Salzer Electronics

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

The idea behind JGCHEMICALS LIMITED and Salzer Electronics 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.