Correlation Between JSW Holdings and Sasken Technologies

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

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

Diversification Opportunities for JSW Holdings and Sasken Technologies

0.83

Correlation Coefficient

JSW Holdings  Sasken Technologies

Very poor diversification

The 3 months correlation between JSW and Sasken is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited and Sasken Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasken Technologies and JSW Holdings 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 JSW Holdings Limited are associated (or correlated) with Sasken Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sasken Technologies has no effect on the direction of JSW Holdings i.e., JSW Holdings and Sasken Technologies go up and down completely randomly.

Pair Corralation between JSW Holdings and Sasken Technologies

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 1.63 times more return on investment than Sasken Technologies. However, JSW Holdings is 1.63 times more volatile than Sasken Technologies Limited. It trades about 0.15 of its potential returns per unit of risk. Sasken Technologies Limited is currently generating about 0.21 per unit of risk. If you would invest  942,680  in JSW Holdings Limited on September 26, 2024 and sell it today you would earn a total of  475,460  from holding JSW Holdings Limited or generate 50.44% return on investment over 90 days.

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

JSW Holdings Limited  vs.  Sasken Technologies Limited

JSW Holdings Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Sasken Technologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sasken Technologies Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward-looking signals, Sasken Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Holdings and Sasken Technologies

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

The idea behind JSW Holdings Limited and Sasken 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.