Correlation Between Niraj Ispat and Jubilant Foodworks

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

By analyzing existing cross correlation between Niraj Ispat Industries and Jubilant Foodworks Limited, you can compare the effects of market volatilities on Niraj Ispat and Jubilant Foodworks 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 Niraj Ispat with a short position of Jubilant Foodworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Niraj Ispat and Jubilant Foodworks.

Diversification Opportunities for Niraj Ispat and Jubilant Foodworks

-0.53

Correlation Coefficient

Niraj Ispat  Jubilant Foodworks

Excellent diversification

The 3 months correlation between Niraj and Jubilant is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Niraj Ispat Industries and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks and Niraj Ispat 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 Niraj Ispat Industries are associated (or correlated) with Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of Niraj Ispat i.e., Niraj Ispat and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Niraj Ispat and Jubilant Foodworks

Assuming the 90 days trading horizon Niraj Ispat Industries is expected to generate 0.72 times more return on investment than Jubilant Foodworks. However, Niraj Ispat Industries is 1.39 times less risky than Jubilant Foodworks. It trades about 0.17 of its potential returns per unit of risk. Jubilant Foodworks Limited is currently generating about -0.02 per unit of risk. If you would invest  18,565  in Niraj Ispat Industries on September 20, 2024 and sell it today you would earn a total of  2,877  from holding Niraj Ispat Industries or generate 15.5% return on investment over 90 days.

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

Niraj Ispat Industries  vs.  Jubilant Foodworks Limited

Niraj Ispat Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niraj Ispat Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Niraj Ispat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Jubilant Foodworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jubilant Foodworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jubilant Foodworks is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Niraj Ispat and Jubilant Foodworks

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

The idea behind Niraj Ispat Industries and Jubilant Foodworks 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.