Correlation Between Generic Engineering and HDFC Bank

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

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

Diversification Opportunities for Generic Engineering and HDFC Bank

0.48

Correlation Coefficient

Generic Engineering  HDFC Bank

Very weak diversification

The 3 months correlation between Generic and HDFC is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi 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 Generic Engineering 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 Generic Engineering Construction 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 Generic Engineering i.e., Generic Engineering and HDFC Bank go up and down completely randomly.

Pair Corralation between Generic Engineering and HDFC Bank

Assuming the 90 days trading horizon Generic Engineering Construction is expected to generate 4.08 times more return on investment than HDFC Bank. However, Generic Engineering is 4.08 times more volatile than HDFC Bank Limited. It trades about -0.08 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about -0.35 per unit of risk. If you would invest  4,598  in Generic Engineering Construction on October 8, 2024 and sell it today you would lose (325.00) from holding Generic Engineering Construction or give up 7.07% of portfolio value over 90 days.

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

Generic Engineering Constructi  vs.  HDFC Bank Limited

Generic Engineering

Risk-Adjusted Performance

1 of 100

Weak

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

HDFC Bank Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 6 (%) 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 February 2025.

Pair Trading with Generic Engineering and HDFC Bank

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

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..