Correlation Between Exide Industries and Bajaj Holdings

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

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

Diversification Opportunities for Exide Industries and Bajaj Holdings

-0.41

Correlation Coefficient

Exide Industries  Bajaj Holdings

Very good diversification

The 3 months correlation between Exide and Bajaj is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Exide Industries Limited 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 Exide Industries 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 Exide Industries Limited 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 Exide Industries i.e., Exide Industries and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Exide Industries and Bajaj Holdings

Assuming the 90 days trading horizon Exide Industries Limited is expected to under-perform the Bajaj Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Exide Industries Limited is 1.68 times less risky than Bajaj Holdings. The stock trades about -0.2 of its potential returns per unit of risk. The Bajaj Holdings Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,036,550  in Bajaj Holdings Investment on November 30, 2024 and sell it today you would earn a total of  120,885  from holding Bajaj Holdings Investment or generate 11.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Exide Industries Limited  vs.  Bajaj Holdings Investment

Exide Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exide Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Bajaj Holdings Investment

Risk-Adjusted Performance

OK

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.

Pair Trading with Exide Industries and Bajaj Holdings

The main advantage of trading using opposite Exide Industries and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exide Industries 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 Exide Industries Limited 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.