Correlation Between Bajaj Holdings and Nalwa Sons

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

Diversification Opportunities for Bajaj Holdings and Nalwa Sons

0.23

Correlation Coefficient

Bajaj Holdings  Nalwa Sons

Modest diversification

The 3 months correlation between Bajaj and Nalwa is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Nalwa Sons Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nalwa Sons Investments 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 Nalwa Sons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nalwa Sons Investments has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Nalwa Sons go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Nalwa Sons

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 0.41 times more return on investment than Nalwa Sons. However, Bajaj Holdings Investment is 2.44 times less risky than Nalwa Sons. It trades about 0.29 of its potential returns per unit of risk. Nalwa Sons Investments is currently generating about -0.17 per unit of risk. If you would invest  1,041,655  in Bajaj Holdings Investment on September 21, 2024 and sell it today you would earn a total of  91,495  from holding Bajaj Holdings Investment or generate 8.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Nalwa Sons Investments

Bajaj Holdings Investment

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 3 (%) 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.

Nalwa Sons Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nalwa Sons Investments are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nalwa Sons unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Holdings and Nalwa Sons

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

The idea behind Bajaj Holdings Investment and Nalwa Sons Investments 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.