Correlation Between GPT Healthcare and Bajaj Holdings

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

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

Diversification Opportunities for GPT Healthcare and Bajaj Holdings

0.47

Correlation Coefficient

GPT Healthcare  Bajaj Holdings

Very weak diversification

The 3 months correlation between GPT and Bajaj is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare 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 GPT Healthcare 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 GPT Healthcare 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 GPT Healthcare i.e., GPT Healthcare and Bajaj Holdings go up and down completely randomly.

Pair Corralation between GPT Healthcare and Bajaj Holdings

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 5.8 times less return on investment than Bajaj Holdings. In addition to that, GPT Healthcare is 1.19 times more volatile than Bajaj Holdings Investment. It trades about 0.01 of its total potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.06 per unit of volatility. If you would invest  1,073,479  in Bajaj Holdings Investment on September 19, 2024 and sell it today you would earn a total of  53,521  from holding Bajaj Holdings Investment or generate 4.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

GPT Healthcare  vs.  Bajaj Holdings Investment

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bajaj Holdings Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 4 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GPT Healthcare and Bajaj Holdings

The main advantage of trading using opposite GPT Healthcare and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT Healthcare 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 GPT Healthcare 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.