Correlation Between Bajaj Holdings and Vertoz Advertising

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

Diversification Opportunities for Bajaj Holdings and Vertoz Advertising

0.23

Correlation Coefficient

Bajaj Holdings  Vertoz Advertising

Modest diversification

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

Pair Corralation between Bajaj Holdings and Vertoz Advertising

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 0.43 times more return on investment than Vertoz Advertising. However, Bajaj Holdings Investment is 2.33 times less risky than Vertoz Advertising. It trades about 0.06 of its potential returns per unit of risk. Vertoz Advertising Limited is currently generating about -0.37 per unit of risk. If you would invest  1,030,500  in Bajaj Holdings Investment on September 5, 2024 and sell it today you would earn a total of  30,215  from holding Bajaj Holdings Investment or generate 2.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Bajaj Holdings Investment  vs.  Vertoz Advertising Limited

Bajaj Holdings Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bajaj Holdings Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Vertoz Advertising

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertoz Advertising Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bajaj Holdings and Vertoz Advertising

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

The idea behind Bajaj Holdings Investment and Vertoz Advertising 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.