Correlation Between HDFC Bank and Naga Dhunseri

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

Diversification Opportunities for HDFC Bank and Naga Dhunseri

0.03

Correlation Coefficient

HDFC Bank  Naga Dhunseri

Significant diversification

The 3 months correlation between HDFC and Naga is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Naga Dhunseri Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naga Dhunseri Group 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 Naga Dhunseri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naga Dhunseri Group has no effect on the direction of HDFC Bank i.e., HDFC Bank and Naga Dhunseri go up and down completely randomly.

Pair Corralation between HDFC Bank and Naga Dhunseri

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.59 times more return on investment than Naga Dhunseri. However, HDFC Bank Limited is 1.7 times less risky than Naga Dhunseri. It trades about 0.0 of its potential returns per unit of risk. Naga Dhunseri Group is currently generating about -0.27 per unit of risk. If you would invest  175,785  in HDFC Bank Limited on October 6, 2024 and sell it today you would lose (865.00) from holding HDFC Bank Limited or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

HDFC Bank Limited  vs.  Naga Dhunseri Group

HDFC Bank Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Naga Dhunseri Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Naga Dhunseri Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Naga Dhunseri may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HDFC Bank and Naga Dhunseri

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

The idea behind HDFC Bank Limited and Naga Dhunseri Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.