Correlation Between Agarwal Industrial and Bajaj Healthcare

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

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

Diversification Opportunities for Agarwal Industrial and Bajaj Healthcare

0.41

Correlation Coefficient

Agarwal Industrial  Bajaj Healthcare

Very weak diversification

The 3 months correlation between Agarwal and Bajaj is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Agarwal Industrial and Bajaj Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bajaj Healthcare and Agarwal Industrial 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 Agarwal Industrial are associated (or correlated) with Bajaj Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bajaj Healthcare has no effect on the direction of Agarwal Industrial i.e., Agarwal Industrial and Bajaj Healthcare go up and down completely randomly.

Pair Corralation between Agarwal Industrial and Bajaj Healthcare

Assuming the 90 days trading horizon Agarwal Industrial is expected to under-perform the Bajaj Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Agarwal Industrial is 1.03 times less risky than Bajaj Healthcare. The stock trades about -0.02 of its potential returns per unit of risk. The Bajaj Healthcare Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  38,518  in Bajaj Healthcare Limited on August 31, 2024 and sell it today you would earn a total of  1,022  from holding Bajaj Healthcare Limited or generate 2.65% return on investment over 90 days.

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

Agarwal Industrial  vs.  Bajaj Healthcare Limited

Agarwal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agarwal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Agarwal Industrial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Bajaj Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bajaj Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Agarwal Industrial and Bajaj Healthcare

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

The idea behind Agarwal Industrial and Bajaj Healthcare Limited 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.