Correlation Between HDFC Bank and Global Health

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

Diversification Opportunities for HDFC Bank and Global Health

0.46

Correlation Coefficient

HDFC Bank  Global Health

Very weak diversification

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

Pair Corralation between HDFC Bank and Global Health

Assuming the 90 days trading horizon HDFC Bank is expected to generate 3.95 times less return on investment than Global Health. But when comparing it to its historical volatility, HDFC Bank Limited is 2.3 times less risky than Global Health. It trades about 0.05 of its potential returns per unit of risk. Global Health Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  107,835  in Global Health Limited on December 30, 2024 and sell it today you would earn a total of  11,995  from holding Global Health Limited or generate 11.12% 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.  Global Health Limited

HDFC Bank Limited

Risk-Adjusted Performance

Insignificant

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 newest stock price disarray, may contribute to short-term losses for the investors.

Global Health Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Global Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HDFC Bank and Global Health

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

The idea behind HDFC Bank Limited and Global Health 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.