Correlation Between Cholamandalam Investment and Bajaj Holdings

Can any of the company-specific risk be diversified away by investing in both Cholamandalam Investment and Bajaj Holdings 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 Cholamandalam Investment and Bajaj Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cholamandalam Investment and and Bajaj Holdings Investment, you can compare the effects of market volatilities on Cholamandalam Investment and Bajaj Holdings 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 Cholamandalam Investment with a short position of Bajaj Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cholamandalam Investment and Bajaj Holdings.

Diversification Opportunities for Cholamandalam Investment and Bajaj Holdings

-0.34

Correlation Coefficient

Cholamandalam Investment  Bajaj Holdings

Very good diversification

The 3 months correlation between Cholamandalam and Bajaj is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Investment and and Bajaj Holdings Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bajaj Holdings Investment and Cholamandalam Investment 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 Cholamandalam Investment and are associated (or correlated) with Bajaj Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bajaj Holdings Investment has no effect on the direction of Cholamandalam Investment i.e., Cholamandalam Investment and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Cholamandalam Investment and Bajaj Holdings

Assuming the 90 days trading horizon Cholamandalam Investment and is expected to under-perform the Bajaj Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Cholamandalam Investment and is 1.3 times less risky than Bajaj Holdings. The stock trades about -0.12 of its potential returns per unit of risk. The Bajaj Holdings Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cholamandalam Investment and  vs.  Bajaj Holdings Investment

Cholamandalam Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Cholamandalam Investment and Bajaj Holdings

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

The idea behind Cholamandalam Investment and and Bajaj Holdings Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.