Correlation Between Prakash Steelage and JGCHEMICALS

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

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

Diversification Opportunities for Prakash Steelage and JGCHEMICALS

0.04

Correlation Coefficient

Prakash Steelage  JGCHEMICALS

Significant diversification

The 3 months correlation between Prakash and JGCHEMICALS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage Limited and JGCHEMICALS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JGCHEMICALS LIMITED and Prakash Steelage 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 Prakash Steelage Limited are associated (or correlated) with JGCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JGCHEMICALS LIMITED has no effect on the direction of Prakash Steelage i.e., Prakash Steelage and JGCHEMICALS go up and down completely randomly.

Pair Corralation between Prakash Steelage and JGCHEMICALS

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to under-perform the JGCHEMICALS. But the stock apears to be less risky and, when comparing its historical volatility, Prakash Steelage Limited is 1.4 times less risky than JGCHEMICALS. The stock trades about -0.05 of its potential returns per unit of risk. The JGCHEMICALS LIMITED is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  39,935  in JGCHEMICALS LIMITED on September 28, 2024 and sell it today you would earn a total of  1,435  from holding JGCHEMICALS LIMITED or generate 3.59% return on investment over 90 days.

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

Prakash Steelage Limited  vs.  JGCHEMICALS LIMITED

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

JGCHEMICALS LIMITED

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical indicators, JGCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prakash Steelage and JGCHEMICALS

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

The idea behind Prakash Steelage Limited and JGCHEMICALS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.