Correlation Between Bajaj Holdings and HEG

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

Diversification Opportunities for Bajaj Holdings and HEG

0.55

Correlation Coefficient

Bajaj Holdings  HEG

Very weak diversification

The 3 months correlation between Bajaj and HEG is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG 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 HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and HEG go up and down completely randomly.

Pair Corralation between Bajaj Holdings and HEG

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.5 times more return on investment than HEG. However, Bajaj Holdings is 1.5 times more volatile than HEG Limited. It trades about 0.02 of its potential returns per unit of risk. HEG Limited is currently generating about -0.32 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  1,390  from holding Bajaj Holdings Investment or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bajaj Holdings Investment  vs.  HEG Limited

Bajaj Holdings Investment

Risk-Adjusted Performance

2 of 100

Weak

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 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.

HEG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HEG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bajaj Holdings and HEG

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

The idea behind Bajaj Holdings Investment and HEG 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.