Correlation Between Bajaj Healthcare and JB Chemicals

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

Diversification Opportunities for Bajaj Healthcare and JB Chemicals

0.11

Correlation Coefficient

Bajaj Healthcare  JB Chemicals

Average diversification

The 3 months correlation between Bajaj and JBCHEPHARM is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and JB Chemicals Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Chemicals Pharmac 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 JB Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Chemicals Pharmac has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and JB Chemicals go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and JB Chemicals

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 2.33 times more return on investment than JB Chemicals. However, Bajaj Healthcare is 2.33 times more volatile than JB Chemicals Pharmaceuticals. It trades about 0.18 of its potential returns per unit of risk. JB Chemicals Pharmaceuticals is currently generating about 0.06 per unit of risk. If you would invest  36,890  in Bajaj Healthcare Limited on October 4, 2024 and sell it today you would earn a total of  20,450  from holding Bajaj Healthcare Limited or generate 55.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Bajaj Healthcare Limited  vs.  JB Chemicals Pharmaceuticals

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.

JB Chemicals Pharmac

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JB Chemicals Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, JB Chemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bajaj Healthcare and JB Chemicals

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

The idea behind Bajaj Healthcare Limited and JB Chemicals Pharmaceuticals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.