Correlation Between Bajaj Healthcare and DiGiSPICE Technologies

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

Diversification Opportunities for Bajaj Healthcare and DiGiSPICE Technologies

0.43

Correlation Coefficient

Bajaj Healthcare  DiGiSPICE Technologies

Very weak diversification

The 3 months correlation between Bajaj and DiGiSPICE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and DiGiSPICE Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiGiSPICE Technologies 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 DiGiSPICE Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiGiSPICE Technologies has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and DiGiSPICE Technologies go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and DiGiSPICE Technologies

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 1.78 times more return on investment than DiGiSPICE Technologies. However, Bajaj Healthcare is 1.78 times more volatile than DiGiSPICE Technologies Limited. It trades about 0.2 of its potential returns per unit of risk. DiGiSPICE Technologies Limited is currently generating about 0.02 per unit of risk. If you would invest  34,040  in Bajaj Healthcare Limited on October 25, 2024 and sell it today you would earn a total of  26,605  from holding Bajaj Healthcare Limited or generate 78.16% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  DiGiSPICE Technologies Limited

Bajaj Healthcare

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

DiGiSPICE Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DiGiSPICE Technologies Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, DiGiSPICE Technologies is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bajaj Healthcare and DiGiSPICE Technologies

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

The idea behind Bajaj Healthcare Limited and DiGiSPICE Technologies 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.