Correlation Between Bajaj Holdings and EID Parry

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

By analyzing existing cross correlation between Bajaj Holdings Investment and EID Parry India, you can compare the effects of market volatilities on Bajaj Holdings and EID Parry 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 Holdings with a short position of EID Parry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Holdings and EID Parry.

Diversification Opportunities for Bajaj Holdings and EID Parry

0.24

Correlation Coefficient

Bajaj Holdings  EID Parry

Modest diversification

The 3 months correlation between Bajaj and EID is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and EID Parry India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EID Parry India and Bajaj Holdings 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 Holdings Investment are associated (or correlated) with EID Parry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EID Parry India has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and EID Parry go up and down completely randomly.

Pair Corralation between Bajaj Holdings and EID Parry

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to under-perform the EID Parry. But the stock apears to be less risky and, when comparing its historical volatility, Bajaj Holdings Investment is 1.34 times less risky than EID Parry. The stock trades about -0.01 of its potential returns per unit of risk. The EID Parry India is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  82,930  in EID Parry India on August 31, 2024 and sell it today you would earn a total of  3,740  from holding EID Parry India or generate 4.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Bajaj Holdings Investment  vs.  EID Parry India

Bajaj Holdings Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bajaj Holdings Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Bajaj Holdings is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

EID Parry India

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EID Parry India are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, EID Parry is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bajaj Holdings and EID Parry

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

The idea behind Bajaj Holdings Investment and EID Parry India 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.