Correlation Between HDFC Asset and Interarch Building

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

By analyzing existing cross correlation between HDFC Asset Management and Interarch Building Products, you can compare the effects of market volatilities on HDFC Asset and Interarch Building 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 Asset with a short position of Interarch Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Asset and Interarch Building.

Diversification Opportunities for HDFC Asset and Interarch Building

0.01

Correlation Coefficient

HDFC Asset  Interarch Building

Significant diversification

The 3 months correlation between HDFC and Interarch is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and Interarch Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interarch Building and HDFC Asset 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 Asset Management are associated (or correlated) with Interarch Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interarch Building has no effect on the direction of HDFC Asset i.e., HDFC Asset and Interarch Building go up and down completely randomly.

Pair Corralation between HDFC Asset and Interarch Building

Assuming the 90 days trading horizon HDFC Asset Management is expected to under-perform the Interarch Building. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Asset Management is 2.21 times less risky than Interarch Building. The stock trades about -0.14 of its potential returns per unit of risk. The Interarch Building Products is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  168,905  in Interarch Building Products on October 22, 2024 and sell it today you would lose (4,385) from holding Interarch Building Products or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

HDFC Asset Management  vs.  Interarch Building Products

HDFC Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Interarch Building

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Interarch Building Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Interarch Building reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Asset and Interarch Building

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

The idea behind HDFC Asset Management and Interarch Building Products 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.