Correlation Between Bajaj Holdings and Life InsuranceOf

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

Diversification Opportunities for Bajaj Holdings and Life InsuranceOf

-0.33

Correlation Coefficient

Bajaj Holdings  Life InsuranceOf

Very good diversification

The 3 months correlation between Bajaj and Life is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life InsuranceOf 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 Life InsuranceOf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life InsuranceOf has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Life InsuranceOf go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Life InsuranceOf

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.97 times more return on investment than Life InsuranceOf. However, Bajaj Holdings is 1.97 times more volatile than Life Insurance. It trades about 0.08 of its potential returns per unit of risk. Life Insurance is currently generating about -0.1 per unit of risk. If you would invest  1,102,915  in Bajaj Holdings Investment on December 24, 2024 and sell it today you would earn a total of  140,635  from holding Bajaj Holdings Investment or generate 12.75% 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.  Life Insurance

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 weak fundamental indicators, Bajaj Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Life InsuranceOf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bajaj Holdings and Life InsuranceOf

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

The idea behind Bajaj Holdings Investment and Life Insurance 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.