Correlation Between Wipro and Baazar Style

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

By analyzing existing cross correlation between Wipro Limited and Baazar Style Retail, you can compare the effects of market volatilities on Wipro and Baazar Style 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 Wipro with a short position of Baazar Style. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wipro and Baazar Style.

Diversification Opportunities for Wipro and Baazar Style

-0.63

Correlation Coefficient

Wipro  Baazar Style

Excellent diversification

The 3 months correlation between Wipro and Baazar is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited and Baazar Style Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baazar Style Retail and Wipro 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 Wipro Limited are associated (or correlated) with Baazar Style. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baazar Style Retail has no effect on the direction of Wipro i.e., Wipro and Baazar Style go up and down completely randomly.

Pair Corralation between Wipro and Baazar Style

Assuming the 90 days trading horizon Wipro Limited is expected to generate 9.0 times more return on investment than Baazar Style. However, Wipro is 9.0 times more volatile than Baazar Style Retail. It trades about 0.11 of its potential returns per unit of risk. Baazar Style Retail is currently generating about 0.02 per unit of risk. If you would invest  27,090  in Wipro Limited on September 4, 2024 and sell it today you would earn a total of  2,075  from holding Wipro Limited or generate 7.66% return on investment over 90 days.

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

Wipro Limited  vs.  Baazar Style Retail

Wipro Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Wipro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baazar Style Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baazar Style Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Wipro and Baazar Style

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

The idea behind Wipro Limited and Baazar Style Retail 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.