Correlation Between Apollo Hospitals and HDFC Bank

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

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

Diversification Opportunities for Apollo Hospitals and HDFC Bank

0.32

Correlation Coefficient

Apollo Hospitals  HDFC Bank

Weak diversification

The 3 months correlation between Apollo and HDFC is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Hospitals Enterprise and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited and Apollo Hospitals 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 Apollo Hospitals Enterprise 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 Limited has no effect on the direction of Apollo Hospitals i.e., Apollo Hospitals and HDFC Bank go up and down completely randomly.

Pair Corralation between Apollo Hospitals and HDFC Bank

Assuming the 90 days trading horizon Apollo Hospitals is expected to generate 3.12 times less return on investment than HDFC Bank. In addition to that, Apollo Hospitals is 1.23 times more volatile than HDFC Bank Limited. It trades about 0.04 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.14 per unit of volatility. If you would invest  164,545  in HDFC Bank Limited on September 5, 2024 and sell it today you would earn a total of  18,085  from holding HDFC Bank Limited or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Apollo Hospitals Enterprise  vs.  HDFC Bank Limited

Apollo Hospitals Ent

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Hospitals Enterprise are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Apollo Hospitals is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

HDFC Bank Limited

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Apollo Hospitals and HDFC Bank

The main advantage of trading using opposite Apollo Hospitals and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apollo Hospitals 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 Apollo Hospitals Enterprise and HDFC Bank 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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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.