Correlation Between POWERGRID Infrastructure and Bajaj Finance
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By analyzing existing cross correlation between POWERGRID Infrastructure Investment and Bajaj Finance Limited, you can compare the effects of market volatilities on POWERGRID Infrastructure 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 POWERGRID Infrastructure with a short position of Bajaj Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of POWERGRID Infrastructure and Bajaj Finance.
Diversification Opportunities for POWERGRID Infrastructure and Bajaj Finance
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between POWERGRID and Bajaj is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding POWERGRID Infrastructure Inves 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 POWERGRID Infrastructure 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 POWERGRID Infrastructure Investment 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 POWERGRID Infrastructure i.e., POWERGRID Infrastructure and Bajaj Finance go up and down completely randomly.
Pair Corralation between POWERGRID Infrastructure and Bajaj Finance
Assuming the 90 days trading horizon POWERGRID Infrastructure Investment is expected to under-perform the Bajaj Finance. But the stock apears to be less risky and, when comparing its historical volatility, POWERGRID Infrastructure Investment is 2.41 times less risky than Bajaj Finance. The stock trades about -0.06 of its potential returns per unit of risk. The Bajaj Finance Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 736,805 in Bajaj Finance Limited on August 29, 2024 and sell it today you would lose (75,010) from holding Bajaj Finance Limited or give up 10.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.18% |
| Values | Daily Returns |
POWERGRID Infrastructure Inves vs. Bajaj Finance Limited
Performance |
| Timeline |
| POWERGRID Infrastructure |
| Bajaj Finance Limited |
POWERGRID Infrastructure and Bajaj Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POWERGRID Infrastructure and Bajaj Finance
The main advantage of trading using opposite POWERGRID Infrastructure and Bajaj Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POWERGRID Infrastructure 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 POWERGRID Infrastructure Investment 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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