Correlation Between HDFC Asset and Life Insurance

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

Diversification Opportunities for HDFC Asset and Life Insurance

0.23

Correlation Coefficient

HDFC Asset  Life Insurance

Modest diversification

The 3 months correlation between HDFC and Life is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance 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 Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of HDFC Asset i.e., HDFC Asset and Life Insurance go up and down completely randomly.

Pair Corralation between HDFC Asset and Life Insurance

Assuming the 90 days trading horizon HDFC Asset Management is expected to generate 1.07 times more return on investment than Life Insurance. However, HDFC Asset is 1.07 times more volatile than Life Insurance. It trades about -0.1 of its potential returns per unit of risk. Life Insurance is currently generating about -0.28 per unit of risk. If you would invest  435,700  in HDFC Asset Management on October 6, 2024 and sell it today you would lose (13,235) from holding HDFC Asset Management or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

HDFC Asset Management  vs.  Life Insurance

HDFC Asset Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Asset Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HDFC Asset and Life Insurance

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

The idea behind HDFC Asset Management and Life Insurance 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.