Correlation Between Bajaj Holdings and TCPL Packaging

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

Diversification Opportunities for Bajaj Holdings and TCPL Packaging

0.45

Correlation Coefficient

Bajaj Holdings  TCPL Packaging

Very weak diversification

The 3 months correlation between Bajaj and TCPL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and TCPL Packaging Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCPL Packaging 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 TCPL Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCPL Packaging has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and TCPL Packaging go up and down completely randomly.

Pair Corralation between Bajaj Holdings and TCPL Packaging

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 0.75 times more return on investment than TCPL Packaging. However, Bajaj Holdings Investment is 1.34 times less risky than TCPL Packaging. It trades about 0.03 of its potential returns per unit of risk. TCPL Packaging Limited is currently generating about 0.01 per unit of risk. If you would invest  1,053,653  in Bajaj Holdings Investment on September 7, 2024 and sell it today you would earn a total of  20,642  from holding Bajaj Holdings Investment or generate 1.96% return on investment over 90 days.

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

Bajaj Holdings Investment  vs.  TCPL Packaging Limited

Bajaj Holdings Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

TCPL Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bajaj Holdings and TCPL Packaging

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

The idea behind Bajaj Holdings Investment and TCPL Packaging 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.