Correlation Between Bajaj Holdings and Kilitch Drugs

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

Diversification Opportunities for Bajaj Holdings and Kilitch Drugs

0.16

Correlation Coefficient

Bajaj Holdings  Kilitch Drugs

Average diversification

The 3 months correlation between Bajaj and Kilitch is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Kilitch Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilitch Drugs 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 Kilitch Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilitch Drugs Limited has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Kilitch Drugs

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to under-perform the Kilitch Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Bajaj Holdings Investment is 1.73 times less risky than Kilitch Drugs. The stock trades about -0.03 of its potential returns per unit of risk. The Kilitch Drugs Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  33,010  in Kilitch Drugs Limited on September 3, 2024 and sell it today you would lose (1,515) from holding Kilitch Drugs Limited or give up 4.59% 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.  Kilitch Drugs Limited

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.

Kilitch Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kilitch Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Kilitch Drugs is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bajaj Holdings and Kilitch Drugs

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

The idea behind Bajaj Holdings Investment and Kilitch Drugs 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.