Correlation Between Bajaj Healthcare and Max Financial

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

Diversification Opportunities for Bajaj Healthcare and Max Financial

-0.59

Correlation Coefficient

Bajaj Healthcare  Max Financial

Excellent diversification

The 3 months correlation between Bajaj and Max is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Max Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Financial Services 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 Max Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Financial Services has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Max Financial go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Max Financial

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 3.07 times more return on investment than Max Financial. However, Bajaj Healthcare is 3.07 times more volatile than Max Financial Services. It trades about 0.03 of its potential returns per unit of risk. Max Financial Services is currently generating about -0.15 per unit of risk. If you would invest  62,405  in Bajaj Healthcare Limited on December 11, 2024 and sell it today you would earn a total of  745.00  from holding Bajaj Healthcare Limited or generate 1.19% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Max Financial Services

Bajaj Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 9 (%) 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.

Max Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bajaj Healthcare and Max Financial

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

The idea behind Bajaj Healthcare Limited and Max Financial Services 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.