Correlation Between Vraj Iron and Bajaj Finance

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

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

Diversification Opportunities for Vraj Iron and Bajaj Finance

0.75

Correlation Coefficient

Vraj Iron  Bajaj Finance

Poor diversification

The 3 months correlation between Vraj and Bajaj is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vraj Iron and 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 Vraj Iron 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 Vraj Iron and 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 Vraj Iron i.e., Vraj Iron and Bajaj Finance go up and down completely randomly.

Pair Corralation between Vraj Iron and Bajaj Finance

Assuming the 90 days trading horizon Vraj Iron and is expected to generate 2.08 times more return on investment than Bajaj Finance. However, Vraj Iron is 2.08 times more volatile than Bajaj Finance Limited. It trades about 0.01 of its potential returns per unit of risk. Bajaj Finance Limited is currently generating about -0.11 per unit of risk. If you would invest  22,358  in Vraj Iron and on September 2, 2024 and sell it today you would lose (118.00) from holding Vraj Iron and or give up 0.53% of portfolio value over 90 days.

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

Vraj Iron and  vs.  Bajaj Finance Limited

Vraj Iron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vraj Iron and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vraj Iron is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bajaj Finance Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bajaj Finance Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vraj Iron and Bajaj Finance

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

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.