Correlation Between HDFC Bank and Max Financial

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

Diversification Opportunities for HDFC Bank and Max Financial

0.12

Correlation Coefficient

HDFC Bank  Max Financial

Average diversification

The 3 months correlation between HDFC and Max is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Max Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Financial Services 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 Max Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Financial Services has no effect on the direction of HDFC Bank i.e., HDFC Bank and Max Financial go up and down completely randomly.

Pair Corralation between HDFC Bank and Max Financial

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the Max Financial. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 1.23 times less risky than Max Financial. The stock trades about -0.36 of its potential returns per unit of risk. The Max Financial Services is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  110,920  in Max Financial Services on October 21, 2024 and sell it today you would lose (2,090) from holding Max Financial Services or give up 1.88% of portfolio value over 90 days.

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

HDFC Bank Limited  vs.  Max Financial Services

HDFC Bank Limited

Risk-Adjusted Performance

0 of 100

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

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with HDFC Bank and Max Financial

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

The idea behind HDFC Bank Limited and Max Financial Services 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.