Correlation Between Bandhan Bank and Dhunseri Investments

Can any of the company-specific risk be diversified away by investing in both Bandhan Bank and Dhunseri Investments 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 Bandhan Bank and Dhunseri Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bandhan Bank Limited and Dhunseri Investments Limited, you can compare the effects of market volatilities on Bandhan Bank and Dhunseri Investments 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 Bandhan Bank with a short position of Dhunseri Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bandhan Bank and Dhunseri Investments.

Diversification Opportunities for Bandhan Bank and Dhunseri Investments

0.24

Correlation Coefficient

Bandhan Bank  Dhunseri Investments

Modest diversification

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

Pair Corralation between Bandhan Bank and Dhunseri Investments

Assuming the 90 days trading horizon Bandhan Bank Limited is expected to under-perform the Dhunseri Investments. But the stock apears to be less risky and, when comparing its historical volatility, Bandhan Bank Limited is 1.15 times less risky than Dhunseri Investments. The stock trades about -0.05 of its potential returns per unit of risk. The Dhunseri Investments Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  233,430  in Dhunseri Investments Limited on September 12, 2024 and sell it today you would lose (4,950) from holding Dhunseri Investments Limited or give up 2.12% of portfolio value over 90 days.

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

Bandhan Bank Limited  vs.  Dhunseri Investments Limited

Bandhan Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bandhan Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Dhunseri Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhunseri Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Dhunseri Investments is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bandhan Bank and Dhunseri Investments

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

The idea behind Bandhan Bank Limited and Dhunseri Investments 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.