Correlation Between Edelweiss Financial and IDBI Bank

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

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

Diversification Opportunities for Edelweiss Financial and IDBI Bank

0.56

Correlation Coefficient

Edelweiss Financial  IDBI Bank

Very weak diversification

The 3 months correlation between Edelweiss and IDBI is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Edelweiss Financial Services and IDBI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDBI Bank Limited and Edelweiss Financial 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 Edelweiss Financial Services are associated (or correlated) with IDBI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDBI Bank Limited has no effect on the direction of Edelweiss Financial i.e., Edelweiss Financial and IDBI Bank go up and down completely randomly.

Pair Corralation between Edelweiss Financial and IDBI Bank

Assuming the 90 days trading horizon Edelweiss Financial Services is expected to generate 2.25 times more return on investment than IDBI Bank. However, Edelweiss Financial is 2.25 times more volatile than IDBI Bank Limited. It trades about 0.22 of its potential returns per unit of risk. IDBI Bank Limited is currently generating about -0.22 per unit of risk. If you would invest  10,848  in Edelweiss Financial Services on September 27, 2024 and sell it today you would earn a total of  1,725  from holding Edelweiss Financial Services or generate 15.9% return on investment over 90 days.

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

Edelweiss Financial Services  vs.  IDBI Bank Limited

Edelweiss Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edelweiss Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

IDBI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDBI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Edelweiss Financial and IDBI Bank

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

The idea behind Edelweiss Financial Services and IDBI 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.