Correlation Between JTL Industries and DCM Shriram

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Can any of the company-specific risk be diversified away by investing in both JTL Industries and DCM Shriram 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 JTL Industries and DCM Shriram into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JTL Industries and DCM Shriram Industries, you can compare the effects of market volatilities on JTL Industries and DCM Shriram 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 JTL Industries with a short position of DCM Shriram. Check out your portfolio center. Please also check ongoing floating volatility patterns of JTL Industries and DCM Shriram.

Diversification Opportunities for JTL Industries and DCM Shriram

0.59
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between JTL Industries and DCM Shriram

Assuming the 90 days trading horizon JTL Industries is expected to generate 2.95 times less return on investment than DCM Shriram. But when comparing it to its historical volatility, JTL Industries is 1.07 times less risky than DCM Shriram. It trades about 0.05 of its potential returns per unit of risk. DCM Shriram Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  19,166  in DCM Shriram Industries on September 12, 2024 and sell it today you would earn a total of  1,573  from holding DCM Shriram Industries or generate 8.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

JTL Industries  vs.  DCM Shriram Industries

 Performance 
       Timeline  
JTL Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JTL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
DCM Shriram Industries 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in DCM Shriram Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, DCM Shriram is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

JTL Industries and DCM Shriram Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JTL Industries and DCM Shriram

The main advantage of trading using opposite JTL Industries and DCM Shriram positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JTL Industries position performs unexpectedly, DCM Shriram 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 DCM Shriram will offset losses from the drop in DCM Shriram's long position.
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The idea behind JTL Industries and DCM Shriram Industries 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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