Correlation Between 21st Century and Bajaj Holdings

Can any of the company-specific risk be diversified away by investing in both 21st Century 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 21st Century and Bajaj Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21st Century Management and Bajaj Holdings Investment, you can compare the effects of market volatilities on 21st Century 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 21st Century with a short position of Bajaj Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21st Century and Bajaj Holdings.

Diversification Opportunities for 21st Century and Bajaj Holdings

-0.37

Correlation Coefficient

21st Century  Bajaj Holdings

Very good diversification

The 3 months correlation between 21st and Bajaj is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding 21st Century Management 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 21st Century 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 21st Century Management 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 21st Century i.e., 21st Century and Bajaj Holdings go up and down completely randomly.

Pair Corralation between 21st Century and Bajaj Holdings

Assuming the 90 days trading horizon 21st Century Management is expected to under-perform the Bajaj Holdings. In addition to that, 21st Century is 1.07 times more volatile than Bajaj Holdings Investment. It trades about -0.34 of its total potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.08 per unit of volatility. If you would invest  1,026,010  in Bajaj Holdings Investment on September 22, 2024 and sell it today you would earn a total of  48,665  from holding Bajaj Holdings Investment or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

21st Century Management  vs.  Bajaj Holdings Investment

21st Century Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 21st Century Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 21st Century and Bajaj Holdings

The main advantage of trading using opposite 21st Century and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21st Century 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 21st Century Management 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.