Correlation Between Bajaj Healthcare and Tamilnadu Telecommunicatio

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

Diversification Opportunities for Bajaj Healthcare and Tamilnadu Telecommunicatio

0.73

Correlation Coefficient

Bajaj Healthcare  Tamilnadu Telecommunicatio

Poor diversification

The 3 months correlation between Bajaj and Tamilnadu is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Tamilnadu Telecommunication Li in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamilnadu Telecommunicatio 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 Tamilnadu Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamilnadu Telecommunicatio has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Tamilnadu Telecommunicatio go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Tamilnadu Telecommunicatio

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 1.08 times more return on investment than Tamilnadu Telecommunicatio. However, Bajaj Healthcare is 1.08 times more volatile than Tamilnadu Telecommunication Limited. It trades about 0.07 of its potential returns per unit of risk. Tamilnadu Telecommunication Limited is currently generating about 0.02 per unit of risk. If you would invest  36,902  in Bajaj Healthcare Limited on October 9, 2024 and sell it today you would earn a total of  20,363  from holding Bajaj Healthcare Limited or generate 55.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Bajaj Healthcare Limited  vs.  Tamilnadu Telecommunication Li

Bajaj Healthcare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tamilnadu Telecommunicatio

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tamilnadu Telecommunication Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Tamilnadu Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Healthcare and Tamilnadu Telecommunicatio

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

The idea behind Bajaj Healthcare Limited and Tamilnadu Telecommunication 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.