Correlation Between Bajaj Healthcare and Bikaji Foods

Can any of the company-specific risk be diversified away by investing in both Bajaj Healthcare and Bikaji Foods 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 Bajaj Healthcare and Bikaji Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bajaj Healthcare Limited and Bikaji Foods International, you can compare the effects of market volatilities on Bajaj Healthcare and Bikaji Foods 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 Bajaj Healthcare with a short position of Bikaji Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Healthcare and Bikaji Foods.

Diversification Opportunities for Bajaj Healthcare and Bikaji Foods

-0.12

Correlation Coefficient

Bajaj Healthcare  Bikaji Foods

Good diversification

The 3 months correlation between Bajaj and Bikaji is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Bikaji Foods International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bikaji Foods Interna and Bajaj Healthcare 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 Bajaj Healthcare Limited are associated (or correlated) with Bikaji Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bikaji Foods Interna has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Bikaji Foods go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Bikaji Foods

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 1.24 times more return on investment than Bikaji Foods. However, Bajaj Healthcare is 1.24 times more volatile than Bikaji Foods International. It trades about 0.12 of its potential returns per unit of risk. Bikaji Foods International is currently generating about -0.17 per unit of risk. If you would invest  36,670  in Bajaj Healthcare Limited on September 5, 2024 and sell it today you would earn a total of  2,305  from holding Bajaj Healthcare Limited or generate 6.29% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Bikaji Foods International

Bajaj Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bikaji Foods Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bikaji Foods International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bajaj Healthcare and Bikaji Foods

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

The idea behind Bajaj Healthcare Limited and Bikaji Foods International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.