Correlation Between Avonmore Capital and Bajaj Holdings

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

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

Diversification Opportunities for Avonmore Capital and Bajaj Holdings

-0.08

Correlation Coefficient

Avonmore Capital  Bajaj Holdings

Good diversification

The 3 months correlation between Avonmore and Bajaj is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Avonmore Capital 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 Avonmore Capital 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 Avonmore Capital 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 Avonmore Capital i.e., Avonmore Capital and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Avonmore Capital and Bajaj Holdings

Assuming the 90 days trading horizon Avonmore Capital Management is expected to generate 2.07 times more return on investment than Bajaj Holdings. However, Avonmore Capital is 2.07 times more volatile than Bajaj Holdings Investment. It trades about -0.01 of its potential returns per unit of risk. Bajaj Holdings Investment is currently generating about -0.02 per unit of risk. If you would invest  1,656  in Avonmore Capital Management on September 23, 2024 and sell it today you would lose (81.00) from holding Avonmore Capital Management or give up 4.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Avonmore Capital Management  vs.  Bajaj Holdings Investment

Avonmore Capital Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avonmore Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Avonmore Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail 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 Avonmore Capital and Bajaj Holdings

The main advantage of trading using opposite Avonmore Capital and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avonmore Capital 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 Avonmore Capital 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 Correlations module to find global opportunities by holding instruments from different markets.