Correlation Between Advani Hotels and Bajaj Holdings

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

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

Diversification Opportunities for Advani Hotels and Bajaj Holdings

0.22

Correlation Coefficient

Advani Hotels  Bajaj Holdings

Modest diversification

The 3 months correlation between Advani and Bajaj is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Advani Hotels Resorts 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 Advani Hotels 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 Advani Hotels Resorts 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 Advani Hotels i.e., Advani Hotels and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Advani Hotels and Bajaj Holdings

Assuming the 90 days trading horizon Advani Hotels Resorts is expected to under-perform the Bajaj Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Advani Hotels Resorts is 1.38 times less risky than Bajaj Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Bajaj Holdings Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,020,300  in Bajaj Holdings Investment on October 26, 2024 and sell it today you would earn a total of  99,530  from holding Bajaj Holdings Investment or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Advani Hotels Resorts  vs.  Bajaj Holdings Investment

Advani Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advani Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Advani Hotels is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Bajaj Holdings Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Advani Hotels and Bajaj Holdings

The main advantage of trading using opposite Advani Hotels and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advani Hotels 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 Advani Hotels Resorts 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.