Correlation Between HDFC Asset and MphasiS

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

Diversification Opportunities for HDFC Asset and MphasiS

0.81

Correlation Coefficient

HDFC Asset  MphasiS

Very poor diversification

The 3 months correlation between HDFC and MphasiS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and MphasiS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MphasiS Limited 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 MphasiS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MphasiS Limited has no effect on the direction of HDFC Asset i.e., HDFC Asset and MphasiS go up and down completely randomly.

Pair Corralation between HDFC Asset and MphasiS

Assuming the 90 days trading horizon HDFC Asset Management is expected to generate 1.03 times more return on investment than MphasiS. However, HDFC Asset is 1.03 times more volatile than MphasiS Limited. It trades about 0.01 of its potential returns per unit of risk. MphasiS Limited is currently generating about 0.0 per unit of risk. If you would invest  370,151  in HDFC Asset Management on December 4, 2024 and sell it today you would earn a total of  1,114  from holding HDFC Asset Management or generate 0.3% return on investment over 90 days.

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

HDFC Asset Management  vs.  MphasiS Limited

HDFC Asset Management

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MphasiS Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days MphasiS Limited 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HDFC Asset and MphasiS

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

The idea behind HDFC Asset Management and MphasiS Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.