Correlation Between Bajaj Holdings and AVALON TECHNOLOGIES

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

Diversification Opportunities for Bajaj Holdings and AVALON TECHNOLOGIES

-0.3

Correlation Coefficient

Bajaj Holdings  AVALON TECHNOLOGIES

Very good diversification

The 3 months correlation between Bajaj and AVALON is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and AVALON TECHNOLOGIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALON TECHNOLOGIES LTD 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 AVALON TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALON TECHNOLOGIES LTD has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Bajaj Holdings and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 0.86 times more return on investment than AVALON TECHNOLOGIES. However, Bajaj Holdings Investment is 1.16 times less risky than AVALON TECHNOLOGIES. It trades about 0.08 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about -0.08 per unit of risk. If you would invest  1,109,400  in Bajaj Holdings Investment on December 26, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bajaj Holdings Investment  vs.  AVALON TECHNOLOGIES LTD

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 uncertain fundamental indicators, Bajaj Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days AVALON TECHNOLOGIES LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bajaj Holdings and AVALON TECHNOLOGIES

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

The idea behind Bajaj Holdings Investment and AVALON TECHNOLOGIES LTD 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.