Correlation Between V2 Retail and Bajaj Holdings

Can any of the company-specific risk be diversified away by investing in both V2 Retail 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 V2 Retail and Bajaj Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between V2 Retail Limited and Bajaj Holdings Investment, you can compare the effects of market volatilities on V2 Retail 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 V2 Retail with a short position of Bajaj Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2 Retail and Bajaj Holdings.

Diversification Opportunities for V2 Retail and Bajaj Holdings

0.2

Correlation Coefficient

V2 Retail  Bajaj Holdings

Modest diversification

The 3 months correlation between V2RETAIL and Bajaj is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding V2 Retail 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 V2 Retail 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 V2 Retail 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 V2 Retail i.e., V2 Retail and Bajaj Holdings go up and down completely randomly.

Pair Corralation between V2 Retail and Bajaj Holdings

Assuming the 90 days trading horizon V2 Retail Limited is expected to generate 1.76 times more return on investment than Bajaj Holdings. However, V2 Retail is 1.76 times more volatile than Bajaj Holdings Investment. It trades about 0.16 of its potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.09 per unit of risk. If you would invest  106,790  in V2 Retail Limited on September 12, 2024 and sell it today you would earn a total of  31,510  from holding V2 Retail Limited or generate 29.51% return on investment over 90 days.

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

V2 Retail Limited  vs.  Bajaj Holdings Investment

V2 Retail Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in V2 Retail Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, V2 Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bajaj Holdings Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Holdings Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Bajaj Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with V2 Retail and Bajaj Holdings

The main advantage of trading using opposite V2 Retail and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2 Retail 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 V2 Retail 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.