Correlation Between Bajaj Healthcare and City Union

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

Diversification Opportunities for Bajaj Healthcare and City Union

0.28

Correlation Coefficient

Bajaj Healthcare  City Union

Modest diversification

The 3 months correlation between Bajaj and City is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank 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 City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and City Union go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and City Union

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 2.03 times more return on investment than City Union. However, Bajaj Healthcare is 2.03 times more volatile than City Union Bank. It trades about 0.11 of its potential returns per unit of risk. City Union Bank is currently generating about 0.03 per unit of risk. If you would invest  37,291  in Bajaj Healthcare Limited on October 4, 2024 and sell it today you would earn a total of  20,049  from holding Bajaj Healthcare Limited or generate 53.76% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  City Union Bank

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 conflicting basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

City Union Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, City Union may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bajaj Healthcare and City Union

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

The idea behind Bajaj Healthcare Limited and City Union Bank 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.