Correlation Between HDFC Bank and Agro Phos

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

By analyzing existing cross correlation between HDFC Bank Limited and Agro Phos India, you can compare the effects of market volatilities on HDFC Bank and Agro Phos 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 Bank with a short position of Agro Phos. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Agro Phos.

Diversification Opportunities for HDFC Bank and Agro Phos

0.24

Correlation Coefficient

HDFC Bank  Agro Phos

Modest diversification

The 3 months correlation between HDFC and Agro is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Agro Phos India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Phos India and HDFC Bank 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 Bank Limited are associated (or correlated) with Agro Phos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Phos India has no effect on the direction of HDFC Bank i.e., HDFC Bank and Agro Phos go up and down completely randomly.

Pair Corralation between HDFC Bank and Agro Phos

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.3 times more return on investment than Agro Phos. However, HDFC Bank Limited is 3.33 times less risky than Agro Phos. It trades about 0.03 of its potential returns per unit of risk. Agro Phos India is currently generating about -0.1 per unit of risk. If you would invest  179,075  in HDFC Bank Limited on December 25, 2024 and sell it today you would earn a total of  3,070  from holding HDFC Bank Limited or generate 1.71% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Agro Phos India

HDFC Bank Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Agro Phos India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Phos India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HDFC Bank and Agro Phos

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

The idea behind HDFC Bank Limited and Agro Phos India 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.