Correlation Between HDFC Bank and Mtar Technologies

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

Diversification Opportunities for HDFC Bank and Mtar Technologies

0.08

Correlation Coefficient

HDFC Bank  Mtar Technologies

Significant diversification

The 3 months correlation between HDFC and Mtar is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Mtar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mtar Technologies 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 Mtar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mtar Technologies has no effect on the direction of HDFC Bank i.e., HDFC Bank and Mtar Technologies go up and down completely randomly.

Pair Corralation between HDFC Bank and Mtar Technologies

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.55 times more return on investment than Mtar Technologies. However, HDFC Bank Limited is 1.8 times less risky than Mtar Technologies. It trades about 0.08 of its potential returns per unit of risk. Mtar Technologies Limited is currently generating about -0.03 per unit of risk. If you would invest  142,539  in HDFC Bank Limited on October 2, 2024 and sell it today you would earn a total of  35,251  from holding HDFC Bank Limited or generate 24.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

HDFC Bank Limited  vs.  Mtar Technologies Limited

HDFC Bank Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 6 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Mtar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mtar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mtar Technologies is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HDFC Bank and Mtar Technologies

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

The idea behind HDFC Bank Limited and Mtar Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.