Correlation Between Bajaj Holdings and Par Drugs

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

Diversification Opportunities for Bajaj Holdings and Par Drugs

-0.17

Correlation Coefficient

Bajaj Holdings  Par Drugs

Good diversification

The 3 months correlation between Bajaj and Par is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Par Drugs And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Par Drugs And 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 Par Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Par Drugs And has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Par Drugs go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Par Drugs

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to under-perform the Par Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Bajaj Holdings Investment is 3.0 times less risky than Par Drugs. The stock trades about -0.03 of its potential returns per unit of risk. The Par Drugs And is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  24,650  in Par Drugs And on September 3, 2024 and sell it today you would earn a total of  10,195  from holding Par Drugs And or generate 41.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Par Drugs And

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.

Par Drugs And

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Par Drugs And are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Par Drugs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Holdings and Par Drugs

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

The idea behind Bajaj Holdings Investment and Par Drugs And 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..