Correlation Between Bajaj Healthcare and Blue Jet

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

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

Diversification Opportunities for Bajaj Healthcare and Blue Jet

0.78

Correlation Coefficient

Bajaj Healthcare  Blue Jet

Poor diversification

The 3 months correlation between Bajaj and Blue is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Blue Jet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Jet Healthcare and Bajaj Healthcare 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 Bajaj Healthcare Limited are associated (or correlated) with Blue Jet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Jet Healthcare has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Blue Jet go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Blue Jet

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 1.8 times more return on investment than Blue Jet. However, Bajaj Healthcare is 1.8 times more volatile than Blue Jet Healthcare. It trades about 0.15 of its potential returns per unit of risk. Blue Jet Healthcare is currently generating about 0.22 per unit of risk. If you would invest  39,735  in Bajaj Healthcare Limited on November 29, 2024 and sell it today you would earn a total of  23,195  from holding Bajaj Healthcare Limited or generate 58.37% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Blue Jet Healthcare

Bajaj Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Jet Healthcare

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Jet Healthcare are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, Blue Jet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Healthcare and Blue Jet

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

The idea behind Bajaj Healthcare Limited and Blue Jet Healthcare 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.