Correlation Between HDFC Bank and Innova Captab

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

Diversification Opportunities for HDFC Bank and Innova Captab

0.77

Correlation Coefficient

HDFC Bank  Innova Captab

Poor diversification

The 3 months correlation between HDFC and Innova is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Innova Captab Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innova Captab 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 Innova Captab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innova Captab Limited has no effect on the direction of HDFC Bank i.e., HDFC Bank and Innova Captab go up and down completely randomly.

Pair Corralation between HDFC Bank and Innova Captab

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the Innova Captab. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 4.53 times less risky than Innova Captab. The stock trades about -0.06 of its potential returns per unit of risk. The Innova Captab Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  101,935  in Innova Captab Limited on September 28, 2024 and sell it today you would earn a total of  3,685  from holding Innova Captab Limited or generate 3.62% 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.  Innova Captab 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.

Innova Captab Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innova Captab Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Innova Captab exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Innova Captab

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

The idea behind HDFC Bank Limited and Innova Captab 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.