Correlation Between HDFC Asset and UCO Bank

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

Diversification Opportunities for HDFC Asset and UCO Bank

0.43

Correlation Coefficient

HDFC Asset  UCO Bank

Very weak diversification

The 3 months correlation between HDFC and UCO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and UCO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UCO Bank 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 UCO Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UCO Bank has no effect on the direction of HDFC Asset i.e., HDFC Asset and UCO Bank go up and down completely randomly.

Pair Corralation between HDFC Asset and UCO Bank

Assuming the 90 days trading horizon HDFC Asset Management is expected to under-perform the UCO Bank. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Asset Management is 1.49 times less risky than UCO Bank. The stock trades about -0.05 of its potential returns per unit of risk. The UCO Bank is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,578  in UCO Bank on October 9, 2024 and sell it today you would lose (277.00) from holding UCO Bank or give up 6.05% of portfolio value over 90 days.

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

HDFC Asset Management  vs.  UCO Bank

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.

UCO Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UCO Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, UCO Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HDFC Asset and UCO Bank

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

The idea behind HDFC Asset Management and UCO Bank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.