Correlation Between HDFC Bank and Apollo Sindoori

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

Diversification Opportunities for HDFC Bank and Apollo Sindoori

-0.1

Correlation Coefficient

HDFC Bank  Apollo Sindoori

Good diversification

The 3 months correlation between HDFC and Apollo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Apollo Sindoori Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Sindoori Hotels 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 Apollo Sindoori. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Sindoori Hotels has no effect on the direction of HDFC Bank i.e., HDFC Bank and Apollo Sindoori go up and down completely randomly.

Pair Corralation between HDFC Bank and Apollo Sindoori

Assuming the 90 days trading horizon HDFC Bank is expected to generate 5.88 times less return on investment than Apollo Sindoori. But when comparing it to its historical volatility, HDFC Bank Limited is 2.56 times less risky than Apollo Sindoori. It trades about 0.02 of its potential returns per unit of risk. Apollo Sindoori Hotels is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  121,356  in Apollo Sindoori Hotels on October 6, 2024 and sell it today you would earn a total of  58,914  from holding Apollo Sindoori Hotels or generate 48.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

HDFC Bank Limited  vs.  Apollo Sindoori Hotels

HDFC Bank Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apollo Sindoori Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Sindoori Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Apollo Sindoori is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HDFC Bank and Apollo Sindoori

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

The idea behind HDFC Bank Limited and Apollo Sindoori Hotels 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.