Correlation Between HDFC Bank and DJ Mediaprint

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

Diversification Opportunities for HDFC Bank and DJ Mediaprint

0.74

Correlation Coefficient

HDFC Bank  DJ Mediaprint

Poor diversification

The 3 months correlation between HDFC and DJML is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and DJ Mediaprint Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DJ Mediaprint Logistics 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 DJ Mediaprint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DJ Mediaprint Logistics has no effect on the direction of HDFC Bank i.e., HDFC Bank and DJ Mediaprint go up and down completely randomly.

Pair Corralation between HDFC Bank and DJ Mediaprint

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the DJ Mediaprint. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 3.98 times less risky than DJ Mediaprint. The stock trades about -0.32 of its potential returns per unit of risk. The DJ Mediaprint Logistics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,559  in DJ Mediaprint Logistics on October 6, 2024 and sell it today you would earn a total of  1,008  from holding DJ Mediaprint Logistics or generate 6.09% return on investment over 90 days.

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

HDFC Bank Limited  vs.  DJ Mediaprint Logistics

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.

DJ Mediaprint Logistics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DJ Mediaprint Logistics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DJ Mediaprint unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and DJ Mediaprint

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

The idea behind HDFC Bank Limited and DJ Mediaprint Logistics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.