Correlation Between Bajaj Healthcare and Kohinoor Foods

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

Diversification Opportunities for Bajaj Healthcare and Kohinoor Foods

0.12

Correlation Coefficient

Bajaj Healthcare  Kohinoor Foods

Average diversification

The 3 months correlation between Bajaj and Kohinoor is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Kohinoor Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohinoor Foods 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 Kohinoor Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohinoor Foods has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Kohinoor Foods go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Kohinoor Foods

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 0.96 times more return on investment than Kohinoor Foods. However, Bajaj Healthcare Limited is 1.04 times less risky than Kohinoor Foods. It trades about 0.11 of its potential returns per unit of risk. Kohinoor Foods Limited is currently generating about 0.03 per unit of risk. If you would invest  37,291  in Bajaj Healthcare Limited on October 4, 2024 and sell it today you would earn a total of  20,049  from holding Bajaj Healthcare Limited or generate 53.76% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Kohinoor Foods Limited

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.

Kohinoor Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohinoor Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kohinoor Foods is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bajaj Healthcare and Kohinoor Foods

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

The idea behind Bajaj Healthcare Limited and Kohinoor Foods 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.