Correlation Between HDFC Bank and Metalfrio Solutions

Can any of the company-specific risk be diversified away by investing in both HDFC Bank and Metalfrio Solutions 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 Metalfrio Solutions 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 Metalfrio Solutions SA, you can compare the effects of market volatilities on HDFC Bank and Metalfrio Solutions 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 Metalfrio Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Metalfrio Solutions.

Diversification Opportunities for HDFC Bank and Metalfrio Solutions

-0.69

Correlation Coefficient

HDFC Bank  Metalfrio Solutions

Excellent diversification

The 3 months correlation between HDFC and Metalfrio is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Metalfrio Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalfrio Solutions 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 Metalfrio Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalfrio Solutions has no effect on the direction of HDFC Bank i.e., HDFC Bank and Metalfrio Solutions go up and down completely randomly.

Pair Corralation between HDFC Bank and Metalfrio Solutions

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the Metalfrio Solutions. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 3.62 times less risky than Metalfrio Solutions. The stock trades about -0.05 of its potential returns per unit of risk. The Metalfrio Solutions SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  22,100  in Metalfrio Solutions SA on December 25, 2024 and sell it today you would earn a total of  4,901  from holding Metalfrio Solutions SA or generate 22.18% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Metalfrio Solutions SA

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 somewhat strong fundamental indicators, HDFC Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Metalfrio Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metalfrio Solutions SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Metalfrio Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Metalfrio Solutions

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

The idea behind HDFC Bank Limited and Metalfrio Solutions SA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.