Correlation Between Zydus Wellness and Banka BioLoo

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

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

Diversification Opportunities for Zydus Wellness and Banka BioLoo

-0.22

Correlation Coefficient

Zydus Wellness  Banka BioLoo

Very good diversification

The 3 months correlation between Zydus and Banka is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zydus Wellness Limited and Banka BioLoo Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banka BioLoo Limited and Zydus Wellness 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 Zydus Wellness Limited are associated (or correlated) with Banka BioLoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banka BioLoo Limited has no effect on the direction of Zydus Wellness i.e., Zydus Wellness and Banka BioLoo go up and down completely randomly.

Pair Corralation between Zydus Wellness and Banka BioLoo

Assuming the 90 days trading horizon Zydus Wellness Limited is expected to generate 0.62 times more return on investment than Banka BioLoo. However, Zydus Wellness Limited is 1.61 times less risky than Banka BioLoo. It trades about 0.04 of its potential returns per unit of risk. Banka BioLoo Limited is currently generating about -0.02 per unit of risk. If you would invest  191,230  in Zydus Wellness Limited on October 6, 2024 and sell it today you would earn a total of  6,935  from holding Zydus Wellness Limited or generate 3.63% return on investment over 90 days.

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

Zydus Wellness Limited  vs.  Banka BioLoo Limited

Zydus Wellness

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zydus Wellness Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Zydus Wellness is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Banka BioLoo Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banka BioLoo Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Banka BioLoo is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Zydus Wellness and Banka BioLoo

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

The idea behind Zydus Wellness Limited and Banka BioLoo 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.