Correlation Between HDFC Bank and Sony

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

Diversification Opportunities for HDFC Bank and Sony

0.83

Correlation Coefficient

HDFC Bank  Sony

Very poor diversification

The 3 months correlation between HDFC and Sony is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group 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 Sony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Group has no effect on the direction of HDFC Bank i.e., HDFC Bank and Sony go up and down completely randomly.

Pair Corralation between HDFC Bank and Sony

Assuming the 90 days trading horizon HDFC Bank is expected to generate 20.61 times less return on investment than Sony. But when comparing it to its historical volatility, HDFC Bank Limited is 12.35 times less risky than Sony. It trades about 0.04 of its potential returns per unit of risk. Sony Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,670  in Sony Group on October 5, 2024 and sell it today you would earn a total of  4,290  from holding Sony Group or generate 49.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.5%
Values	Daily Returns

HDFC Bank Limited  vs.  Sony Group

HDFC Bank Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 10 (%) 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.

Sony Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sony sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Sony

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

The idea behind HDFC Bank Limited and Sony Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.