Correlation Between Bharat Road and Bajaj Holdings

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

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

Diversification Opportunities for Bharat Road and Bajaj Holdings

0.61

Correlation Coefficient

Bharat Road  Bajaj Holdings

Poor diversification

The 3 months correlation between Bharat and Bajaj is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bharat Road Network and Bajaj Holdings Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bajaj Holdings Investment and Bharat Road 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 Bharat Road Network are associated (or correlated) with Bajaj Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bajaj Holdings Investment has no effect on the direction of Bharat Road i.e., Bharat Road and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Bharat Road and Bajaj Holdings

Assuming the 90 days trading horizon Bharat Road is expected to generate 1.36 times less return on investment than Bajaj Holdings. In addition to that, Bharat Road is 1.02 times more volatile than Bajaj Holdings Investment. It trades about 0.17 of its total potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.23 per unit of volatility. If you would invest  1,022,000  in Bajaj Holdings Investment on September 28, 2024 and sell it today you would earn a total of  98,205  from holding Bajaj Holdings Investment or generate 9.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bharat Road Network  vs.  Bajaj Holdings Investment

Bharat Road Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharat Road Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bharat Road is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Bajaj Holdings Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bharat Road and Bajaj Holdings

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

The idea behind Bharat Road Network and Bajaj Holdings Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.