Correlation Between Bajaj Holdings and Dodla Dairy

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

Diversification Opportunities for Bajaj Holdings and Dodla Dairy

-0.14

Correlation Coefficient

Bajaj Holdings  Dodla Dairy

Good diversification

The 3 months correlation between Bajaj and Dodla is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Dodla Dairy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodla Dairy 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 Dodla Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodla Dairy Limited has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Dodla Dairy go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Dodla Dairy

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.19 times more return on investment than Dodla Dairy. However, Bajaj Holdings is 1.19 times more volatile than Dodla Dairy Limited. It trades about 0.07 of its potential returns per unit of risk. Dodla Dairy Limited is currently generating about -0.02 per unit of risk. If you would invest  1,126,160  in Bajaj Holdings Investment on December 27, 2024 and sell it today you would earn a total of  133,745  from holding Bajaj Holdings Investment or generate 11.88% 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.  Dodla Dairy 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 unsteady fundamental indicators, Bajaj Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dodla Dairy Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dodla Dairy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Dodla Dairy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bajaj Holdings and Dodla Dairy

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

The idea behind Bajaj Holdings Investment and Dodla Dairy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.