Correlation Between Bajaj Holdings and Kewal Kiran

Can any of the company-specific risk be diversified away by investing in both Bajaj Holdings and Kewal Kiran 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 Kewal Kiran 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 Kewal Kiran Clothing, you can compare the effects of market volatilities on Bajaj Holdings and Kewal Kiran 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 Kewal Kiran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Holdings and Kewal Kiran.

Diversification Opportunities for Bajaj Holdings and Kewal Kiran

0.29

Correlation Coefficient

Bajaj Holdings  Kewal Kiran

Modest diversification

The 3 months correlation between Bajaj and Kewal is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Kewal Kiran Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kewal Kiran Clothing 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 Kewal Kiran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kewal Kiran Clothing has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Kewal Kiran go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Kewal Kiran

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to under-perform the Kewal Kiran. In addition to that, Bajaj Holdings is 1.02 times more volatile than Kewal Kiran Clothing. It trades about -0.03 of its total potential returns per unit of risk. Kewal Kiran Clothing is currently generating about 0.03 per unit of volatility. If you would invest  61,830  in Kewal Kiran Clothing on September 3, 2024 and sell it today you would earn a total of  1,360  from holding Kewal Kiran Clothing or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Kewal Kiran Clothing

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Kewal Kiran Clothing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kewal Kiran Clothing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Kewal Kiran is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bajaj Holdings and Kewal Kiran

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

The idea behind Bajaj Holdings Investment and Kewal Kiran Clothing 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..