Correlation Between JM Financial and CSB Bank

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

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

Diversification Opportunities for JM Financial and CSB Bank

0.95

Correlation Coefficient

JM Financial  CSB Bank

Almost no diversification

The 3 months correlation between JMFINANCIL and CSB is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding JM Financial Limited and CSB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB Bank Limited and JM Financial 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 JM Financial Limited are associated (or correlated) with CSB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bank Limited has no effect on the direction of JM Financial i.e., JM Financial and CSB Bank go up and down completely randomly.

Pair Corralation between JM Financial and CSB Bank

Assuming the 90 days trading horizon JM Financial Limited is expected to generate 1.74 times more return on investment than CSB Bank. However, JM Financial is 1.74 times more volatile than CSB Bank Limited. It trades about 0.31 of its potential returns per unit of risk. CSB Bank Limited is currently generating about 0.18 per unit of risk. If you would invest  10,422  in JM Financial Limited on April 24, 2025 and sell it today you would earn a total of  6,602  from holding JM Financial Limited or generate 63.35% return on investment over 90 days.

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

JM Financial Limited  vs.  CSB Bank Limited

JM Financial Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

CSB Bank Limited

Risk-Adjusted Performance

Good

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

Pair Trading with JM Financial and CSB Bank

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

The idea behind JM Financial Limited and CSB Bank 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.