Correlation Between Bajaj Holdings and Cantabil Retail

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

Diversification Opportunities for Bajaj Holdings and Cantabil Retail

0.03

Correlation Coefficient

Bajaj Holdings  Cantabil Retail

Significant diversification

The 3 months correlation between Bajaj and Cantabil is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail India 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 Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Cantabil Retail go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Cantabil Retail

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 0.76 times more return on investment than Cantabil Retail. However, Bajaj Holdings Investment is 1.32 times less risky than Cantabil Retail. It trades about -0.03 of its potential returns per unit of risk. Cantabil Retail India is currently generating about -0.03 per unit of risk. If you would invest  1,081,983  in Bajaj Holdings Investment on September 3, 2024 and sell it today you would lose (35,158) from holding Bajaj Holdings Investment or give up 3.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Cantabil Retail India

Bajaj Holdings Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bajaj Holdings Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Bajaj Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cantabil Retail India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cantabil Retail India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Cantabil Retail is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bajaj Holdings and Cantabil Retail

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

The idea behind Bajaj Holdings Investment and Cantabil Retail India 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.