Correlation Between Allied Blenders and Bajaj Finance

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

Diversification Opportunities for Allied Blenders and Bajaj Finance

AlliedBajajDiversified AwayAlliedBajajDiversified Away100%
0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Allied and Bajaj is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Allied Blenders Distillers and Bajaj Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bajaj Finance Limited and Allied Blenders 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 Allied Blenders Distillers are associated (or correlated) with Bajaj Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bajaj Finance Limited has no effect on the direction of Allied Blenders i.e., Allied Blenders and Bajaj Finance go up and down completely randomly.

Pair Corralation between Allied Blenders and Bajaj Finance

Assuming the 90 days trading horizon Allied Blenders Distillers is expected to generate 1.61 times more return on investment than Bajaj Finance. However, Allied Blenders is 1.61 times more volatile than Bajaj Finance Limited. It trades about 0.03 of its potential returns per unit of risk. Bajaj Finance Limited is currently generating about -0.02 per unit of risk. If you would invest  35,995  in Allied Blenders Distillers on September 15, 2024 and sell it today you would earn a total of  1,250  from holding Allied Blenders Distillers or generate 3.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Allied Blenders Distillers  vs.  Bajaj Finance Limited

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -15-10-505
JavaScript chart by amCharts 3.21.15ABDL BAJFINANCE
       Timeline  
Allied Blenders Dist 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Allied Blenders is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec300310320330340350360370380
Bajaj Finance Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bajaj Finance Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bajaj Finance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec6,6006,8007,0007,2007,4007,6007,800

Allied Blenders and Bajaj Finance Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.66-5.74-3.81-1.89-0.021.873.845.817.799.76 0.050.100.15
JavaScript chart by amCharts 3.21.15ABDL BAJFINANCE
       Returns  

Pair Trading with Allied Blenders and Bajaj Finance

The main advantage of trading using opposite Allied Blenders and Bajaj Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Blenders position performs unexpectedly, Bajaj Finance 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 Bajaj Finance will offset losses from the drop in Bajaj Finance's long position.
The idea behind Allied Blenders Distillers and Bajaj Finance 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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