Correlation Between HDFC Asset and Spencers Retail

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

Diversification Opportunities for HDFC Asset and Spencers Retail

0.5

Correlation Coefficient

HDFC Asset  Spencers Retail

Very weak diversification

The 3 months correlation between HDFC and Spencers is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail 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 Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of HDFC Asset i.e., HDFC Asset and Spencers Retail go up and down completely randomly.

Pair Corralation between HDFC Asset and Spencers Retail

Assuming the 90 days trading horizon HDFC Asset Management is expected to under-perform the Spencers Retail. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Asset Management is 2.49 times less risky than Spencers Retail. The stock trades about -0.3 of its potential returns per unit of risk. The Spencers Retail Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,040  in Spencers Retail Limited on October 9, 2024 and sell it today you would lose (267.00) from holding Spencers Retail Limited or give up 2.95% of portfolio value over 90 days.

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

HDFC Asset Management  vs.  Spencers Retail Limited

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 rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with HDFC Asset and Spencers Retail

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

The idea behind HDFC Asset Management and Spencers Retail 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.