Correlation Between HDFC Bank and Mosaic

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

Diversification Opportunities for HDFC Bank and Mosaic

0.56

Correlation Coefficient

HDFC Bank  Mosaic

Very weak diversification

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

Pair Corralation between HDFC Bank and Mosaic

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the Mosaic. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 1.25 times less risky than Mosaic. The stock trades about -0.49 of its potential returns per unit of risk. The The Mosaic is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  2,649  in The Mosaic on October 15, 2024 and sell it today you would lose (129.00) from holding The Mosaic or give up 4.87% of portfolio value over 90 days.

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

HDFC Bank Limited  vs.  The Mosaic

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. Despite somewhat weak fundamental indicators, HDFC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Mosaic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Mosaic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mosaic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HDFC Bank and Mosaic

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

The idea behind HDFC Bank Limited and The Mosaic 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.