Correlation Between HDFC Bank and Emkay Global

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

Diversification Opportunities for HDFC Bank and Emkay Global

0.83

Correlation Coefficient

HDFC Bank  Emkay Global

Very poor diversification

The 3 months correlation between HDFC and Emkay is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Emkay Global Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emkay Global Financial 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 Emkay Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emkay Global Financial has no effect on the direction of HDFC Bank i.e., HDFC Bank and Emkay Global go up and down completely randomly.

Pair Corralation between HDFC Bank and Emkay Global

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.63 times more return on investment than Emkay Global. However, HDFC Bank Limited is 1.59 times less risky than Emkay Global. It trades about -0.32 of its potential returns per unit of risk. Emkay Global Financial is currently generating about -0.46 per unit of risk. If you would invest  186,575  in HDFC Bank Limited on October 6, 2024 and sell it today you would lose (11,655) from holding HDFC Bank Limited or give up 6.25% of portfolio value over 90 days.

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

HDFC Bank Limited  vs.  Emkay Global Financial

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.

Emkay Global Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emkay Global Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Emkay Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Emkay Global

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

The idea behind HDFC Bank Limited and Emkay Global Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.