Correlation Between Commercial Credit and HDFC Bank

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

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

Diversification Opportunities for Commercial Credit and HDFC Bank

0.57

Correlation Coefficient

Commercial Credit  HDFC Bank

Very weak diversification

The 3 months correlation between Commercial and HDFC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Credit and and HDFC Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank and Commercial Credit 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 Commercial Credit and 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 Commercial Credit i.e., Commercial Credit and HDFC Bank go up and down completely randomly.

Pair Corralation between Commercial Credit and HDFC Bank

Assuming the 90 days trading horizon Commercial Credit is expected to generate 3.53 times less return on investment than HDFC Bank. But when comparing it to its historical volatility, Commercial Credit and is 2.72 times less risky than HDFC Bank. It trades about 0.05 of its potential returns per unit of risk. HDFC Bank of is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,840  in HDFC Bank of on December 26, 2024 and sell it today you would earn a total of  460.00  from holding HDFC Bank of or generate 11.98% return on investment over 90 days.

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

Commercial Credit and  vs.  HDFC Bank of

Commercial Credit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial Credit and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Commercial Credit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HDFC Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HDFC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial Credit and HDFC Bank

The main advantage of trading using opposite Commercial Credit and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Credit 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 Commercial Credit and and HDFC Bank of 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.