Correlation Between Bajaj Holdings and Arvind

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

Diversification Opportunities for Bajaj Holdings and Arvind

-0.33

Correlation Coefficient

Bajaj Holdings  Arvind

Very good diversification

The 3 months correlation between Bajaj and Arvind is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Arvind Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arvind 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 Arvind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arvind Limited has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Arvind go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Arvind

Assuming the 90 days trading horizon Bajaj Holdings is expected to generate 2.04 times less return on investment than Arvind. But when comparing it to its historical volatility, Bajaj Holdings Investment is 1.47 times less risky than Arvind. It trades about 0.08 of its potential returns per unit of risk. Arvind Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,541  in Arvind Limited on December 2, 2024 and sell it today you would earn a total of  25,374  from holding Arvind Limited or generate 297.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Arvind 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 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Bajaj Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Arvind Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arvind Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Arvind is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bajaj Holdings and Arvind

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

The idea behind Bajaj Holdings Investment and Arvind 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.