Correlation Between Bajaj Healthcare and Clean Science

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

Diversification Opportunities for Bajaj Healthcare and Clean Science

-0.07

Correlation Coefficient

Bajaj Healthcare  Clean Science

Good diversification

The 3 months correlation between Bajaj and Clean is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Clean Science and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Science 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 Clean Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Science has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Clean Science go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Clean Science

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 2.26 times more return on investment than Clean Science. However, Bajaj Healthcare is 2.26 times more volatile than Clean Science and. It trades about 0.24 of its potential returns per unit of risk. Clean Science and is currently generating about 0.21 per unit of risk. If you would invest  44,930  in Bajaj Healthcare Limited on October 10, 2024 and sell it today you would earn a total of  14,365  from holding Bajaj Healthcare Limited or generate 31.97% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Clean Science and

Bajaj Healthcare

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Clean Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Clean Science is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bajaj Healthcare and Clean Science

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

The idea behind Bajaj Healthcare Limited and Clean Science 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.