Correlation Between Sitara Chemical and JS Investments

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

By analyzing existing cross correlation between Sitara Chemical Industries and JS Investments, you can compare the effects of market volatilities on Sitara Chemical and JS Investments 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 Sitara Chemical with a short position of JS Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitara Chemical and JS Investments.

Diversification Opportunities for Sitara Chemical and JS Investments

0.27

Correlation Coefficient

Sitara Chemical  JS Investments

Modest diversification

The 3 months correlation between Sitara and JSIL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sitara Chemical Industries and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments and Sitara Chemical 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 Sitara Chemical Industries are associated (or correlated) with JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of Sitara Chemical i.e., Sitara Chemical and JS Investments go up and down completely randomly.

Pair Corralation between Sitara Chemical and JS Investments

Assuming the 90 days trading horizon Sitara Chemical is expected to generate 1.98 times less return on investment than JS Investments. But when comparing it to its historical volatility, Sitara Chemical Industries is 1.62 times less risky than JS Investments. It trades about 0.11 of its potential returns per unit of risk. JS Investments is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,248  in JS Investments on September 5, 2024 and sell it today you would earn a total of  222.00  from holding JS Investments or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Sitara Chemical Industries  vs.  JS Investments

Sitara Chemical Indu

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sitara Chemical Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Sitara Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JS Investments

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sitara Chemical and JS Investments

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

The idea behind Sitara Chemical Industries and JS Investments 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.