Correlation Between HDFC Bank and Schweizerische Nationalbank

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

Diversification Opportunities for HDFC Bank and Schweizerische Nationalbank

-0.5

Correlation Coefficient

HDFC Bank  Schweizerische Nationalbank

Very good diversification

The 3 months correlation between HDFC and Schweizerische is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Schweizerische Nationalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweizerische Nationalbank 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 Schweizerische Nationalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweizerische Nationalbank has no effect on the direction of HDFC Bank i.e., HDFC Bank and Schweizerische Nationalbank go up and down completely randomly.

Pair Corralation between HDFC Bank and Schweizerische Nationalbank

Considering the 90-day investment horizon HDFC Bank is expected to generate 2.13 times less return on investment than Schweizerische Nationalbank. But when comparing it to its historical volatility, HDFC Bank Limited is 1.03 times less risky than Schweizerische Nationalbank. It trades about 0.04 of its potential returns per unit of risk. Schweizerische Nationalbank is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  353,738  in Schweizerische Nationalbank on December 30, 2024 and sell it today you would earn a total of  25,906  from holding Schweizerische Nationalbank or generate 7.32% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Schweizerische Nationalbank

HDFC Bank Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Schweizerische Nationalbank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schweizerische Nationalbank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Schweizerische Nationalbank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HDFC Bank and Schweizerische Nationalbank

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

The idea behind HDFC Bank Limited and Schweizerische Nationalbank 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.