Correlation Between Bajaj Healthcare and Dhunseri Investments

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

Diversification Opportunities for Bajaj Healthcare and Dhunseri Investments

-0.51

Correlation Coefficient

Bajaj Healthcare  Dhunseri Investments

Excellent diversification

The 3 months correlation between Bajaj and Dhunseri is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Dhunseri Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhunseri Investments 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 Dhunseri Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhunseri Investments has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Dhunseri Investments go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Dhunseri Investments

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 4.52 times more return on investment than Dhunseri Investments. However, Bajaj Healthcare is 4.52 times more volatile than Dhunseri Investments Limited. It trades about 0.31 of its potential returns per unit of risk. Dhunseri Investments Limited is currently generating about -0.47 per unit of risk. If you would invest  44,930  in Bajaj Healthcare Limited on October 8, 2024 and sell it today you would earn a total of  18,330  from holding Bajaj Healthcare Limited or generate 40.8% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Dhunseri Investments Limited

Bajaj Healthcare

Risk-Adjusted Performance

17 of 100

Solid

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

Dhunseri Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhunseri Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Dhunseri Investments is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bajaj Healthcare and Dhunseri Investments

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

The idea behind Bajaj Healthcare Limited and Dhunseri Investments 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.