Correlation Between HDFC Bank and Hardwyn India

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

Diversification Opportunities for HDFC Bank and Hardwyn India

-0.59

Correlation Coefficient

HDFC Bank  Hardwyn India

Excellent diversification

The 3 months correlation between HDFC and Hardwyn is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Hardwyn India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hardwyn India Limited 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 Hardwyn India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hardwyn India Limited has no effect on the direction of HDFC Bank i.e., HDFC Bank and Hardwyn India go up and down completely randomly.

Pair Corralation between HDFC Bank and Hardwyn India

Assuming the 90 days trading horizon HDFC Bank is expected to generate 46.65 times less return on investment than Hardwyn India. But when comparing it to its historical volatility, HDFC Bank Limited is 32.99 times less risky than Hardwyn India. It trades about 0.03 of its potential returns per unit of risk. Hardwyn India Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,197  in Hardwyn India Limited on September 28, 2024 and sell it today you would lose (232.00) from holding Hardwyn India Limited or give up 7.26% of portfolio value over 90 days.

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

HDFC Bank Limited  vs.  Hardwyn India Limited

HDFC Bank Limited

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Hardwyn India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hardwyn India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HDFC Bank and Hardwyn India

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

The idea behind HDFC Bank Limited and Hardwyn India Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.