Correlation Between Bajaj Healthcare and Cholamandalam Investment

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

Diversification Opportunities for Bajaj Healthcare and Cholamandalam Investment

0.78

Correlation Coefficient

Bajaj Healthcare  Cholamandalam Investment

Poor diversification

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

Pair Corralation between Bajaj Healthcare and Cholamandalam Investment

Assuming the 90 days trading horizon Bajaj Healthcare is expected to generate 1.15 times less return on investment than Cholamandalam Investment. In addition to that, Bajaj Healthcare is 2.19 times more volatile than Cholamandalam Investment and. It trades about 0.07 of its total potential returns per unit of risk. Cholamandalam Investment and is currently generating about 0.16 per unit of volatility. If you would invest  121,586  in Cholamandalam Investment and on December 30, 2024 and sell it today you would earn a total of  30,409  from holding Cholamandalam Investment and or generate 25.01% 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.  Cholamandalam Investment and

Bajaj Healthcare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 5 (%) 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.

Cholamandalam Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cholamandalam Investment and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Cholamandalam Investment demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Healthcare and Cholamandalam Investment

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

The idea behind Bajaj Healthcare Limited and Cholamandalam Investment and 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.