Correlation Between HDFC Bank and Jonestown Bank

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

Diversification Opportunities for HDFC Bank and Jonestown Bank

0.19

Correlation Coefficient

HDFC Bank  Jonestown Bank

Average diversification

The 3 months correlation between HDFC and Jonestown is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Jonestown Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jonestown Bank 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 Jonestown Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jonestown Bank has no effect on the direction of HDFC Bank i.e., HDFC Bank and Jonestown Bank go up and down completely randomly.

Pair Corralation between HDFC Bank and Jonestown Bank

Considering the 90-day investment horizon HDFC Bank Limited is expected to under-perform the Jonestown Bank. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 1.25 times less risky than Jonestown Bank. The stock trades about -0.22 of its potential returns per unit of risk. The Jonestown Bank and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,960  in Jonestown Bank and on October 25, 2024 and sell it today you would earn a total of  25.00  from holding Jonestown Bank and or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

HDFC Bank Limited  vs.  Jonestown Bank and

HDFC Bank Limited

Risk-Adjusted Performance

0 of 100

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Jonestown Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jonestown Bank and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Jonestown Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HDFC Bank and Jonestown Bank

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

The idea behind HDFC Bank Limited and Jonestown Bank and 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.