Correlation Between Bajaj Holdings and State Bank

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

Diversification Opportunities for Bajaj Holdings and State Bank

-0.23

Correlation Coefficient

Bajaj Holdings  State Bank

Very good diversification

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

Pair Corralation between Bajaj Holdings and State Bank

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 2.32 times more return on investment than State Bank. However, Bajaj Holdings is 2.32 times more volatile than State Bank of. It trades about 0.07 of its potential returns per unit of risk. State Bank of is currently generating about -0.04 per unit of risk. If you would invest  1,109,400  in Bajaj Holdings Investment on December 25, 2024 and sell it today you would earn a total of  134,150  from holding Bajaj Holdings Investment or generate 12.09% 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.  State Bank of

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

State Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bajaj Holdings and State Bank

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

The idea behind Bajaj Holdings Investment and State Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.