Correlation Between Bajaj Healthcare and HDFC Life

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

Diversification Opportunities for Bajaj Healthcare and HDFC Life

-0.78

Correlation Coefficient

Bajaj Healthcare  HDFC Life

Pay attention - limited upside

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

Pair Corralation between Bajaj Healthcare and HDFC Life

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 1.88 times more return on investment than HDFC Life. However, Bajaj Healthcare is 1.88 times more volatile than HDFC Life Insurance. It trades about 0.04 of its potential returns per unit of risk. HDFC Life Insurance is currently generating about 0.01 per unit of risk. If you would invest  41,863  in Bajaj Healthcare Limited on October 4, 2024 and sell it today you would earn a total of  15,477  from holding Bajaj Healthcare Limited or generate 36.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Bajaj Healthcare Limited  vs.  HDFC Life Insurance

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.

HDFC Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bajaj Healthcare and HDFC Life

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

The idea behind Bajaj Healthcare Limited and HDFC Life Insurance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.