Correlation Between HDFC Bank and SHINHAN FINL

Can any of the company-specific risk be diversified away by investing in both HDFC Bank and SHINHAN FINL 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 SHINHAN FINL 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 SHINHAN FINL ADR1, you can compare the effects of market volatilities on HDFC Bank and SHINHAN FINL 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 SHINHAN FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and SHINHAN FINL.

Diversification Opportunities for HDFC Bank and SHINHAN FINL

-0.61

Correlation Coefficient

HDFC Bank  SHINHAN FINL

Excellent diversification

The 3 months correlation between HDFC and SHINHAN is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and SHINHAN FINL ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHINHAN FINL ADR1 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 SHINHAN FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHINHAN FINL ADR1 has no effect on the direction of HDFC Bank i.e., HDFC Bank and SHINHAN FINL go up and down completely randomly.

Pair Corralation between HDFC Bank and SHINHAN FINL

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.66 times more return on investment than SHINHAN FINL. However, HDFC Bank Limited is 1.52 times less risky than SHINHAN FINL. It trades about 0.04 of its potential returns per unit of risk. SHINHAN FINL ADR1 is currently generating about -0.05 per unit of risk. If you would invest  5,900  in HDFC Bank Limited on September 25, 2024 and sell it today you would earn a total of  200.00  from holding HDFC Bank Limited or generate 3.39% 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.  SHINHAN FINL ADR1

HDFC Bank Limited

Risk-Adjusted Performance

3 of 100

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 nearly stable technical and fundamental indicators, HDFC Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SHINHAN FINL ADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHINHAN FINL ADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HDFC Bank and SHINHAN FINL

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

The idea behind HDFC Bank Limited and SHINHAN FINL ADR1 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.