Correlation Between Speciality Restaurants and Bajaj Finance

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

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

Diversification Opportunities for Speciality Restaurants and Bajaj Finance

-0.4

Correlation Coefficient

Speciality Restaurants  Bajaj Finance

Very good diversification

The 3 months correlation between Speciality and Bajaj is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and Bajaj Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bajaj Finance Limited and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with Bajaj Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bajaj Finance Limited has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and Bajaj Finance go up and down completely randomly.

Pair Corralation between Speciality Restaurants and Bajaj Finance

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the Bajaj Finance. In addition to that, Speciality Restaurants is 1.06 times more volatile than Bajaj Finance Limited. It trades about -0.14 of its total potential returns per unit of risk. Bajaj Finance Limited is currently generating about 0.06 per unit of volatility. If you would invest  678,090  in Bajaj Finance Limited on October 21, 2024 and sell it today you would earn a total of  40,120  from holding Bajaj Finance Limited or generate 5.92% return on investment over 90 days.

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

Speciality Restaurants Limited  vs.  Bajaj Finance Limited

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bajaj Finance Limited

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Speciality Restaurants and Bajaj Finance

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

The idea behind Speciality Restaurants Limited and Bajaj Finance 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.