Correlation Between Apple and HDFC Bank

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

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

Diversification Opportunities for Apple and HDFC Bank

0.46

Correlation Coefficient

Apple  HDFC Bank

Very weak diversification

The 3 months correlation between Apple and HDFC is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and HDFC Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank and Apple 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 Apple Inc 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 Apple i.e., Apple and HDFC Bank go up and down completely randomly.

Pair Corralation between Apple and HDFC Bank

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.92 times more return on investment than HDFC Bank. However, Apple Inc is 1.09 times less risky than HDFC Bank. It trades about 0.01 of its potential returns per unit of risk. HDFC Bank is currently generating about -0.01 per unit of risk. If you would invest  21,260  in Apple Inc on October 24, 2024 and sell it today you would earn a total of  120.00  from holding Apple Inc or generate 0.56% return on investment over 90 days.

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

Apple Inc  vs.  HDFC Bank

Apple Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Apple is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HDFC Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HDFC Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and HDFC Bank

The main advantage of trading using opposite Apple and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.