Correlation Between HMT and Bajaj Healthcare

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

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

Diversification Opportunities for HMT and Bajaj Healthcare

-0.32

Correlation Coefficient

HMT  Bajaj Healthcare

Very good diversification

The 3 months correlation between HMT and Bajaj is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Bajaj Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bajaj Healthcare and HMT 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 HMT Limited are associated (or correlated) with Bajaj Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bajaj Healthcare has no effect on the direction of HMT i.e., HMT and Bajaj Healthcare go up and down completely randomly.

Pair Corralation between HMT and Bajaj Healthcare

Assuming the 90 days trading horizon HMT Limited is expected to generate 0.87 times more return on investment than Bajaj Healthcare. However, HMT Limited is 1.14 times less risky than Bajaj Healthcare. It trades about 0.07 of its potential returns per unit of risk. Bajaj Healthcare Limited is currently generating about 0.05 per unit of risk. If you would invest  3,295  in HMT Limited on October 21, 2024 and sell it today you would earn a total of  3,462  from holding HMT Limited or generate 105.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HMT Limited  vs.  Bajaj Healthcare Limited

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Bajaj Healthcare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HMT and Bajaj Healthcare

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

The idea behind HMT Limited and Bajaj Healthcare 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.