Correlation Between Bajaj Holdings and Aban Offshore

Can any of the company-specific risk be diversified away by investing in both Bajaj Holdings and Aban Offshore 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 Holdings and Aban Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bajaj Holdings Investment and Aban Offshore Limited, you can compare the effects of market volatilities on Bajaj Holdings and Aban Offshore 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 Holdings with a short position of Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Holdings and Aban Offshore.

Diversification Opportunities for Bajaj Holdings and Aban Offshore

-0.49

Correlation Coefficient

Bajaj Holdings  Aban Offshore

Very good diversification

The 3 months correlation between Bajaj and Aban is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and Bajaj Holdings 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 Holdings Investment are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Aban Offshore go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Aban Offshore

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.04 times more return on investment than Aban Offshore. However, Bajaj Holdings is 1.04 times more volatile than Aban Offshore Limited. It trades about 0.08 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.25 per unit of risk. If you would invest  1,109,400  in Bajaj Holdings Investment on December 25, 2024 and sell it today you would earn a total of  142,750  from holding Bajaj Holdings Investment or generate 12.87% return on investment over 90 days.

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

Bajaj Holdings Investment  vs.  Aban Offshore Limited

Bajaj Holdings Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Bajaj Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aban Offshore Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bajaj Holdings and Aban Offshore

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

The idea behind Bajaj Holdings Investment and Aban Offshore 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.