Correlation Between HDFC Bank and Jupiter Life

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

Diversification Opportunities for HDFC Bank and Jupiter Life

0.46

Correlation Coefficient

HDFC Bank  Jupiter Life

Very weak diversification

The 3 months correlation between HDFC and Jupiter is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Jupiter Life Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jupiter Life Line 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 Jupiter Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jupiter Life Line has no effect on the direction of HDFC Bank i.e., HDFC Bank and Jupiter Life go up and down completely randomly.

Pair Corralation between HDFC Bank and Jupiter Life

Assuming the 90 days trading horizon HDFC Bank is expected to generate 10.72 times less return on investment than Jupiter Life. But when comparing it to its historical volatility, HDFC Bank Limited is 1.5 times less risky than Jupiter Life. It trades about 0.01 of its potential returns per unit of risk. Jupiter Life Line is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  156,195  in Jupiter Life Line on December 27, 2024 and sell it today you would earn a total of  13,355  from holding Jupiter Life Line or generate 8.55% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Jupiter Life Line

HDFC Bank Limited

Risk-Adjusted Performance

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 very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Jupiter Life Line

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jupiter Life Line are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Jupiter Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HDFC Bank and Jupiter Life

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

The idea behind HDFC Bank Limited and Jupiter Life Line 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.