Correlation Between Bajaj Healthcare and Jindal Poly

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

Diversification Opportunities for Bajaj Healthcare and Jindal Poly

0.54

Correlation Coefficient

Bajaj Healthcare  Jindal Poly

Very weak diversification

The 3 months correlation between Bajaj and Jindal is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Jindal Poly Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Poly Investment 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 Jindal Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Poly Investment has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Jindal Poly go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Jindal Poly

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 2.95 times more return on investment than Jindal Poly. However, Bajaj Healthcare is 2.95 times more volatile than Jindal Poly Investment. It trades about 0.26 of its potential returns per unit of risk. Jindal Poly Investment is currently generating about -0.22 per unit of risk. If you would invest  39,150  in Bajaj Healthcare Limited on September 23, 2024 and sell it today you would earn a total of  14,240  from holding Bajaj Healthcare Limited or generate 36.37% 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.  Jindal Poly Investment

Bajaj Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Jindal Poly Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Poly Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Jindal Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Healthcare and Jindal Poly

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

The idea behind Bajaj Healthcare Limited and Jindal Poly Investment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.