Correlation Between Electrosteel Castings and JM Financial

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

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

Diversification Opportunities for Electrosteel Castings and JM Financial

0.8

Correlation Coefficient

Electrosteel Castings  JM Financial

Very poor diversification

The 3 months correlation between Electrosteel and JMFINANCIL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited and Electrosteel Castings 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 Electrosteel Castings Limited are associated (or correlated) with JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and JM Financial go up and down completely randomly.

Pair Corralation between Electrosteel Castings and JM Financial

Assuming the 90 days trading horizon Electrosteel Castings is expected to generate 4.76 times less return on investment than JM Financial. In addition to that, Electrosteel Castings is 1.15 times more volatile than JM Financial Limited. It trades about 0.06 of its total potential returns per unit of risk. JM Financial Limited is currently generating about 0.35 per unit of volatility. If you would invest  10,246  in JM Financial Limited on April 25, 2025 and sell it today you would earn a total of  7,713  from holding JM Financial Limited or generate 75.28% return on investment over 90 days.

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

Electrosteel Castings Limited  vs.  JM Financial Limited

Electrosteel Castings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electrosteel Castings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Electrosteel Castings may actually be approaching a critical reversion point that can send shares even higher in August 2025.

JM Financial Limited

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electrosteel Castings and JM Financial

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

The idea behind Electrosteel Castings Limited and JM Financial 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .