Correlation Between Bajaj Holdings and Bombay Burmah

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

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

Diversification Opportunities for Bajaj Holdings and Bombay Burmah

0.51

Correlation Coefficient

Bajaj Holdings  Bombay Burmah

Very weak diversification

The 3 months correlation between Bajaj and Bombay is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Holdings Investment and Bombay Burmah Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombay Burmah Trading and Bajaj Holdings 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 Bajaj Holdings Investment are associated (or correlated) with Bombay Burmah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombay Burmah Trading has no effect on the direction of Bajaj Holdings i.e., Bajaj Holdings and Bombay Burmah go up and down completely randomly.

Pair Corralation between Bajaj Holdings and Bombay Burmah

Assuming the 90 days trading horizon Bajaj Holdings Investment is expected to generate 1.18 times more return on investment than Bombay Burmah. However, Bajaj Holdings is 1.18 times more volatile than Bombay Burmah Trading. It trades about 0.08 of its potential returns per unit of risk. Bombay Burmah Trading is currently generating about 0.06 per unit of risk. If you would invest  1,236,625  in Bajaj Holdings Investment on March 27, 2025 and sell it today you would earn a total of  140,775  from holding Bajaj Holdings Investment or generate 11.38% return on investment over 90 days.

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

Bajaj Holdings Investment  vs.  Bombay Burmah Trading

Bajaj Holdings Investment

Risk-Adjusted Performance

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 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bombay Burmah Trading

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bombay Burmah Trading are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Bombay Burmah may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Bajaj Holdings and Bombay Burmah

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

The idea behind Bajaj Holdings Investment and Bombay Burmah Trading 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.