Correlation Between Bajaj Holdings and Zodiac Clothing

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

Diversification Opportunities for Bajaj Holdings and Zodiac Clothing

0.65

Correlation Coefficient

Bajaj Holdings  Zodiac Clothing

Poor diversification

The 3 months correlation between Bajaj and Zodiac is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Zodiac Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zodiac Clothing 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 Zodiac Clothing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zodiac Clothing has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Zodiac Clothing go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Zodiac Clothing

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.14 times more return on investment than Zodiac Clothing. However, Bajaj Holdings is 1.14 times more volatile than Zodiac Clothing. It trades about 0.05 of its potential returns per unit of risk. Zodiac Clothing is currently generating about 0.05 per unit of risk. If you would invest  1,036,000  in Bajaj Holdings Investment on October 8, 2024 and sell it today you would earn a total of  66,595  from holding Bajaj Holdings Investment or generate 6.43% return on investment over 90 days.

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

Bajaj Holdings Investment  vs.  Zodiac Clothing

Bajaj Holdings Investment

Risk-Adjusted Performance

3 of 100

Insignificant

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 uncertain fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zodiac Clothing

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zodiac Clothing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Zodiac Clothing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bajaj Holdings and Zodiac Clothing

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

The idea behind Bajaj Holdings Investment and Zodiac Clothing 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.