Correlation Between Caseys General and HDFC Bank

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

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

Diversification Opportunities for Caseys General and HDFC Bank

0.39

Correlation Coefficient

Caseys General  HDFC Bank

Weak diversification

The 3 months correlation between Caseys and HDFC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores 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 Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and HDFC Bank go up and down completely randomly.

Pair Corralation between Caseys General and HDFC Bank

Assuming the 90 days trading horizon Caseys General Stores is expected to under-perform the HDFC Bank. But the stock apears to be less risky and, when comparing its historical volatility, Caseys General Stores is 1.02 times less risky than HDFC Bank. The stock trades about -0.06 of its potential returns per unit of risk. The HDFC Bank Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  6,100  in HDFC Bank Limited on December 20, 2024 and sell it today you would lose (400.00) from holding HDFC Bank Limited or give up 6.56% of portfolio value over 90 days.

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

Caseys General Stores  vs.  HDFC Bank Limited

Caseys General Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caseys General Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

HDFC Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, HDFC Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caseys General and HDFC Bank

The main advantage of trading using opposite Caseys General and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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 Caseys General Stores 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.