Correlation Between Bajaj Holdings and Elin Electronics

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

Diversification Opportunities for Bajaj Holdings and Elin Electronics

-0.26

Correlation Coefficient

Bajaj Holdings  Elin Electronics

Very good diversification

The 3 months correlation between Bajaj and Elin is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics 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 Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Elin Electronics go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Elin Electronics

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.68 times more return on investment than Elin Electronics. However, Bajaj Holdings is 1.68 times more volatile than Elin Electronics Limited. It trades about 0.03 of its potential returns per unit of risk. Elin Electronics Limited is currently generating about -0.22 per unit of risk. If you would invest  1,115,500  in Bajaj Holdings Investment on October 11, 2024 and sell it today you would earn a total of  11,580  from holding Bajaj Holdings Investment or generate 1.04% 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.  Elin Electronics Limited

Bajaj Holdings Investment

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 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 Elin Electronics

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

The idea behind Bajaj Holdings Investment and Elin Electronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.