Correlation Between HDFC Bank and Cantabil Retail

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

Diversification Opportunities for HDFC Bank and Cantabil Retail

0.37

Correlation Coefficient

HDFC Bank  Cantabil Retail

Weak diversification

The 3 months correlation between HDFC and Cantabil is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail 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 Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of HDFC Bank i.e., HDFC Bank and Cantabil Retail go up and down completely randomly.

Pair Corralation between HDFC Bank and Cantabil Retail

Assuming the 90 days trading horizon HDFC Bank is expected to generate 18.86 times less return on investment than Cantabil Retail. But when comparing it to its historical volatility, HDFC Bank Limited is 15.17 times less risky than Cantabil Retail. It trades about 0.03 of its potential returns per unit of risk. Cantabil Retail India is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  25,910  in Cantabil Retail India on October 5, 2024 and sell it today you would earn a total of  2,840  from holding Cantabil Retail India or generate 10.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

HDFC Bank Limited  vs.  Cantabil Retail India

HDFC Bank Limited

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cantabil Retail India

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Cantabil Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Cantabil Retail

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

The idea behind HDFC Bank Limited and Cantabil Retail 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.