Correlation Between Bajaj Healthcare and Capacite Infraprojects

Can any of the company-specific risk be diversified away by investing in both Bajaj Healthcare and Capacite Infraprojects 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 Capacite Infraprojects 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 Capacite Infraprojects Limited, you can compare the effects of market volatilities on Bajaj Healthcare and Capacite Infraprojects 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 Capacite Infraprojects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Healthcare and Capacite Infraprojects.

Diversification Opportunities for Bajaj Healthcare and Capacite Infraprojects

0.69

Correlation Coefficient

Bajaj Healthcare  Capacite Infraprojects

Poor diversification

The 3 months correlation between Bajaj and Capacite is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Capacite Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capacite Infraprojects 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 Capacite Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capacite Infraprojects has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Capacite Infraprojects go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Capacite Infraprojects

Assuming the 90 days trading horizon Bajaj Healthcare is expected to generate 1.37 times less return on investment than Capacite Infraprojects. In addition to that, Bajaj Healthcare is 1.02 times more volatile than Capacite Infraprojects Limited. It trades about 0.06 of its total potential returns per unit of risk. Capacite Infraprojects Limited is currently generating about 0.08 per unit of volatility. If you would invest  25,945  in Capacite Infraprojects Limited on September 23, 2024 and sell it today you would earn a total of  17,865  from holding Capacite Infraprojects Limited or generate 68.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Bajaj Healthcare Limited  vs.  Capacite Infraprojects Limited

Bajaj Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capacite Infraprojects

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, Capacite Infraprojects unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Healthcare and Capacite Infraprojects

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

The idea behind Bajaj Healthcare Limited and Capacite Infraprojects 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.