Correlation Between HDFC Bank and Baidu
Can any of the company-specific risk be diversified away by investing in both HDFC Bank and Baidu 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 HDFC Bank and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HDFC Bank Limited and Baidu Inc, you can compare the effects of market volatilities on HDFC Bank and Baidu 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 HDFC Bank with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Baidu.
Diversification Opportunities for HDFC Bank and Baidu
Very good diversification
The 3 months correlation between HDFC and Baidu is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and HDFC Bank 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 HDFC Bank Limited are associated (or correlated) with Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of HDFC Bank i.e., HDFC Bank and Baidu go up and down completely randomly.
Pair Corralation between HDFC Bank and Baidu
Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.88 times more return on investment than Baidu. However, HDFC Bank Limited is 1.13 times less risky than Baidu. It trades about 0.14 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.02 per unit of risk. If you would invest 6,462 in HDFC Bank Limited on September 24, 2024 and sell it today you would earn a total of 1,554 from holding HDFC Bank Limited or generate 24.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
HDFC Bank Limited vs. Baidu Inc
Performance |
Timeline |
HDFC Bank Limited |
Baidu Inc |
HDFC Bank and Baidu Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HDFC Bank and Baidu
The main advantage of trading using opposite HDFC Bank and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, Baidu 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 Baidu will offset losses from the drop in Baidu's long position.HDFC Bank vs. Ita Unibanco Holding | HDFC Bank vs. Ita Unibanco Holding | HDFC Bank vs. Deutsche Bank Aktiengesellschaft | HDFC Bank vs. Banco Bradesco SA |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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