Correlation Between HDFC Bank and Diligent Media

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

Diversification Opportunities for HDFC Bank and Diligent Media

0.01

Correlation Coefficient

HDFC Bank  Diligent Media

Significant diversification

The 3 months correlation between HDFC and Diligent is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Diligent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diligent Media 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 Diligent Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diligent Media has no effect on the direction of HDFC Bank i.e., HDFC Bank and Diligent Media go up and down completely randomly.

Pair Corralation between HDFC Bank and Diligent Media

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the Diligent Media. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 4.7 times less risky than Diligent Media. The stock trades about -0.13 of its potential returns per unit of risk. The Diligent Media is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Diligent Media on December 4, 2024 and sell it today you would lose (3.00) from holding Diligent Media or give up 0.58% of portfolio value over 90 days.

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

HDFC Bank Limited  vs.  Diligent Media

HDFC Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Diligent Media

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Diligent Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HDFC Bank and Diligent Media

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

The idea behind HDFC Bank Limited and Diligent Media 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.