Correlation Between HDFC Bank and ZhongAn Online

Can any of the company-specific risk be diversified away by investing in both HDFC Bank and ZhongAn Online 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 ZhongAn Online into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HDFC Bank and ZhongAn Online P, you can compare the effects of market volatilities on HDFC Bank and ZhongAn Online 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 ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and ZhongAn Online.

Diversification Opportunities for HDFC Bank and ZhongAn Online

-0.04

Correlation Coefficient

HDFC Bank  ZhongAn Online

Good diversification

The 3 months correlation between HDFC and ZhongAn is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P 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 are associated (or correlated) with ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of HDFC Bank i.e., HDFC Bank and ZhongAn Online go up and down completely randomly.

Pair Corralation between HDFC Bank and ZhongAn Online

Assuming the 90 days trading horizon HDFC Bank is expected to under-perform the ZhongAn Online. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank is 1.72 times less risky than ZhongAn Online. The stock trades about -0.31 of its potential returns per unit of risk. The ZhongAn Online P is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  143.00  in ZhongAn Online P on October 25, 2024 and sell it today you would lose (8.00) from holding ZhongAn Online P or give up 5.59% of portfolio value over 90 days.

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

HDFC Bank  vs.  ZhongAn Online P

HDFC Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HDFC Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HDFC Bank and ZhongAn Online

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

The idea behind HDFC Bank and ZhongAn Online P 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.