Correlation Between G Tec and HDFC Bank

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

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

Diversification Opportunities for G Tec and HDFC Bank

-0.61

Correlation Coefficient

G Tec  HDFC Bank

Excellent diversification

The 3 months correlation between GTECJAINX and HDFC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding G Tec Jainx Education 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 G Tec 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 G Tec Jainx Education 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 G Tec i.e., G Tec and HDFC Bank go up and down completely randomly.

Pair Corralation between G Tec and HDFC Bank

Assuming the 90 days trading horizon G Tec is expected to generate 1.12 times less return on investment than HDFC Bank. In addition to that, G Tec is 3.36 times more volatile than HDFC Bank Limited. It trades about 0.05 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.19 per unit of volatility. If you would invest  174,225  in HDFC Bank Limited on September 20, 2024 and sell it today you would earn a total of  6,845  from holding HDFC Bank Limited or generate 3.93% return on investment over 90 days.

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

G Tec Jainx Education  vs.  HDFC Bank Limited

G Tec Jainx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G Tec Jainx Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

HDFC Bank Limited

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with G Tec and HDFC Bank

The main advantage of trading using opposite G Tec and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G Tec 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 G Tec Jainx Education 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.