Correlation Between Axway Software and HDFC Bank

Can any of the company-specific risk be diversified away by investing in both Axway Software and HDFC Bank 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 Axway Software and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axway Software SA and HDFC Bank, you can compare the effects of market volatilities on Axway Software and HDFC Bank 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 Axway Software with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axway Software and HDFC Bank.

Diversification Opportunities for Axway Software and HDFC Bank

0.7

Correlation Coefficient

Axway Software  HDFC Bank

Poor diversification

The 3 months correlation between Axway and HDFC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Axway Software SA and HDFC Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank and Axway Software 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 Axway Software SA are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank has no effect on the direction of Axway Software i.e., Axway Software and HDFC Bank go up and down completely randomly.

Pair Corralation between Axway Software and HDFC Bank

Assuming the 90 days trading horizon Axway Software is expected to generate 1.25 times less return on investment than HDFC Bank. But when comparing it to its historical volatility, Axway Software SA is 1.36 times less risky than HDFC Bank. It trades about 0.13 of its potential returns per unit of risk. HDFC Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,500  in HDFC Bank on October 8, 2024 and sell it today you would earn a total of  650.00  from holding HDFC Bank or generate 11.82% return on investment over 90 days.

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

Axway Software SA  vs.  HDFC Bank

Axway Software SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axway Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HDFC Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Axway Software and HDFC Bank

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

The idea behind Axway Software SA and HDFC Bank 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.