Correlation Between Bajaj Holdings and Steel Authority

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

Diversification Opportunities for Bajaj Holdings and Steel Authority

0.09

Correlation Coefficient

Bajaj Holdings  Steel Authority

Significant diversification

The 3 months correlation between Bajaj and Steel is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority 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 Steel Authority. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Authority has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Steel Authority go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Steel Authority

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 0.77 times more return on investment than Steel Authority. However, Bajaj Holdings Investment is 1.3 times less risky than Steel Authority. It trades about 0.08 of its potential returns per unit of risk. Steel Authority of is currently generating about -0.14 per unit of risk. If you would invest  1,052,500  in Bajaj Holdings Investment on September 29, 2024 and sell it today you would earn a total of  77,590  from holding Bajaj Holdings Investment or generate 7.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Steel Authority of

Bajaj Holdings Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Bajaj Holdings Investment and Steel Authority of 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.