Correlation Between Zydus Wellness and Jayant Agro

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

By analyzing existing cross correlation between Zydus Wellness Limited and Jayant Agro Organics, you can compare the effects of market volatilities on Zydus Wellness and Jayant Agro 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 Zydus Wellness with a short position of Jayant Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zydus Wellness and Jayant Agro.

Diversification Opportunities for Zydus Wellness and Jayant Agro

0.59

Correlation Coefficient

Zydus Wellness  Jayant Agro

Very weak diversification

The 3 months correlation between Zydus and Jayant is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zydus Wellness Limited and Jayant Agro Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jayant Agro Organics and Zydus Wellness 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 Zydus Wellness Limited are associated (or correlated) with Jayant Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jayant Agro Organics has no effect on the direction of Zydus Wellness i.e., Zydus Wellness and Jayant Agro go up and down completely randomly.

Pair Corralation between Zydus Wellness and Jayant Agro

Assuming the 90 days trading horizon Zydus Wellness Limited is expected to under-perform the Jayant Agro. But the stock apears to be less risky and, when comparing its historical volatility, Zydus Wellness Limited is 1.09 times less risky than Jayant Agro. The stock trades about -0.04 of its potential returns per unit of risk. The Jayant Agro Organics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  30,315  in Jayant Agro Organics on September 21, 2024 and sell it today you would lose (1,510) from holding Jayant Agro Organics or give up 4.98% of portfolio value over 90 days.

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

Zydus Wellness Limited  vs.  Jayant Agro Organics

Zydus Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zydus Wellness Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zydus Wellness is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Jayant Agro Organics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zydus Wellness and Jayant Agro

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

The idea behind Zydus Wellness Limited and Jayant Agro Organics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.