Correlation Between Bajaj Holdings and Salzer Electronics

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

Diversification Opportunities for Bajaj Holdings and Salzer Electronics

0.7

Correlation Coefficient

Bajaj Holdings  Salzer Electronics

Poor diversification

The 3 months correlation between Bajaj and Salzer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Salzer Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzer Electronics 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 Salzer Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzer Electronics has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Salzer Electronics go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Salzer Electronics

Assuming the 90 days trading horizon Bajaj Holdings is expected to generate 7.29 times less return on investment than Salzer Electronics. In addition to that, Bajaj Holdings is 1.16 times more volatile than Salzer Electronics Limited. It trades about 0.02 of its total potential returns per unit of risk. Salzer Electronics Limited is currently generating about 0.19 per unit of volatility. If you would invest  128,415  in Salzer Electronics Limited on October 10, 2024 and sell it today you would earn a total of  18,195  from holding Salzer Electronics Limited or generate 14.17% return on investment over 90 days.

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

Bajaj Holdings Investment  vs.  Salzer Electronics Limited

Bajaj Holdings Investment

Risk-Adjusted Performance

2 of 100

Insignificant

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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Salzer Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salzer Electronics Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Salzer Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bajaj Holdings and Salzer Electronics

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

The idea behind Bajaj Holdings Investment and Salzer Electronics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.