Correlation Between Maharashtra Scooters and Bajaj Holdings

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Can any of the company-specific risk be diversified away by investing in both Maharashtra Scooters 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 Maharashtra Scooters and Bajaj Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maharashtra Scooters Limited and Bajaj Holdings Investment, you can compare the effects of market volatilities on Maharashtra Scooters 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 Maharashtra Scooters with a short position of Bajaj Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maharashtra Scooters and Bajaj Holdings.

Diversification Opportunities for Maharashtra Scooters and Bajaj Holdings

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Maharashtra and Bajaj is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Maharashtra Scooters 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 Maharashtra Scooters 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 Maharashtra Scooters 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 Maharashtra Scooters i.e., Maharashtra Scooters and Bajaj Holdings go up and down completely randomly.

Pair Corralation between Maharashtra Scooters and Bajaj Holdings

Assuming the 90 days trading horizon Maharashtra Scooters Limited is expected to under-perform the Bajaj Holdings. In addition to that, Maharashtra Scooters is 1.63 times more volatile than Bajaj Holdings Investment. It trades about -0.22 of its total potential returns per unit of risk. Bajaj Holdings Investment is currently generating about 0.11 per unit of volatility. If you would invest  1,082,255  in Bajaj Holdings Investment on September 12, 2024 and sell it today you would earn a total of  37,520  from holding Bajaj Holdings Investment or generate 3.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Maharashtra Scooters Limited  vs.  Bajaj Holdings Investment

 Performance 
       Timeline  
Maharashtra Scooters 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maharashtra Scooters is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.
Bajaj Holdings Investment 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
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.

Maharashtra Scooters and Bajaj Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Maharashtra Scooters and Bajaj Holdings

The main advantage of trading using opposite Maharashtra Scooters and Bajaj Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maharashtra Scooters 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 Maharashtra Scooters 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.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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