Correlation Between Sudarshan Chemical and Bajaj Holdings

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

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

Diversification Opportunities for Sudarshan Chemical and Bajaj Holdings

0.6

Correlation Coefficient

Sudarshan Chemical  Bajaj Holdings

Poor diversification

The 3 months correlation between Sudarshan and Bajaj is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sudarshan Chemical Industries 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 Sudarshan Chemical 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 Sudarshan Chemical Industries 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 Sudarshan Chemical i.e., Sudarshan Chemical and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Sudarshan Chemical and Bajaj Holdings

Assuming the 90 days trading horizon Sudarshan Chemical Industries is expected to generate 0.84 times more return on investment than Bajaj Holdings. However, Sudarshan Chemical Industries is 1.2 times less risky than Bajaj Holdings. It trades about 0.4 of its potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.13 per unit of risk. If you would invest  98,160  in Sudarshan Chemical Industries on September 27, 2024 and sell it today you would earn a total of  15,035  from holding Sudarshan Chemical Industries or generate 15.32% return on investment over 90 days.

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

Sudarshan Chemical Industries  vs.  Bajaj Holdings Investment

Sudarshan Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Sudarshan Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 conflicting fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sudarshan Chemical and Bajaj Holdings

The main advantage of trading using opposite Sudarshan Chemical and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sudarshan Chemical 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 Sudarshan Chemical Industries 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.