Correlation Between Bajaj Healthcare and Silver Touch

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

Diversification Opportunities for Bajaj Healthcare and Silver Touch

0.24

Correlation Coefficient

Bajaj Healthcare  Silver Touch

Modest diversification

The 3 months correlation between Bajaj and Silver is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Silver Touch Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Touch Technologies 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 Silver Touch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Touch Technologies has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Silver Touch go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Silver Touch

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 2.19 times more return on investment than Silver Touch. However, Bajaj Healthcare is 2.19 times more volatile than Silver Touch Technologies. It trades about 0.03 of its potential returns per unit of risk. Silver Touch Technologies is currently generating about -0.06 per unit of risk. If you would invest  38,518  in Bajaj Healthcare Limited on September 2, 2024 and sell it today you would earn a total of  1,217  from holding Bajaj Healthcare Limited or generate 3.16% return on investment over 90 days.

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

Bajaj Healthcare Limited  vs.  Silver Touch Technologies

Bajaj Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bajaj Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Silver Touch Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Touch Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Silver Touch is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bajaj Healthcare and Silver Touch

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

The idea behind Bajaj Healthcare Limited and Silver Touch Technologies 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.