Correlation Between Kewal Kiran and Bajaj Holdings

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

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

Diversification Opportunities for Kewal Kiran and Bajaj Holdings

0.28

Correlation Coefficient

Kewal Kiran  Bajaj Holdings

Modest diversification

The 3 months correlation between Kewal and Bajaj is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kewal Kiran Clothing 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 Kewal Kiran 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 Kewal Kiran Clothing 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 Kewal Kiran i.e., Kewal Kiran and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Kewal Kiran and Bajaj Holdings

Assuming the 90 days trading horizon Kewal Kiran Clothing is expected to under-perform the Bajaj Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Kewal Kiran Clothing is 1.01 times less risky than Bajaj Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Bajaj Holdings Investment is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  774,251  in Bajaj Holdings Investment on September 4, 2024 and sell it today you would earn a total of  266,079  from holding Bajaj Holdings Investment or generate 34.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Kewal Kiran Clothing  vs.  Bajaj Holdings Investment

Kewal Kiran Clothing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kewal Kiran Clothing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Kewal Kiran is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Kewal Kiran and Bajaj Holdings

The main advantage of trading using opposite Kewal Kiran and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kewal Kiran 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 Kewal Kiran Clothing 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.