Correlation Between PB Fintech and Bajaj Holdings

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

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

Diversification Opportunities for PB Fintech and Bajaj Holdings

0.63

Correlation Coefficient

PB Fintech  Bajaj Holdings

Poor diversification

The 3 months correlation between POLICYBZR and Bajaj is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PB Fintech Limited 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 PB Fintech 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 PB Fintech Limited 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 PB Fintech i.e., PB Fintech and Bajaj Holdings go up and down completely randomly.

Pair Corralation between PB Fintech and Bajaj Holdings

Assuming the 90 days trading horizon PB Fintech Limited is expected to generate 1.56 times more return on investment than Bajaj Holdings. However, PB Fintech is 1.56 times more volatile than Bajaj Holdings Investment. It trades about 0.1 of its potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.06 per unit of risk. If you would invest  187,745  in PB Fintech Limited on September 19, 2024 and sell it today you would earn a total of  25,600  from holding PB Fintech Limited or generate 13.64% return on investment over 90 days.

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

PB Fintech Limited  vs.  Bajaj Holdings Investment

PB Fintech Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PB Fintech Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, PB Fintech sustained solid returns over the last few months and may actually be approaching a breakup point.

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 PB Fintech and Bajaj Holdings

The main advantage of trading using opposite PB Fintech and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PB Fintech 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 PB Fintech Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.