Correlation Between HDFC Bank and Oil Natural

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

Diversification Opportunities for HDFC Bank and Oil Natural

-0.64

Correlation Coefficient

HDFC Bank  Oil Natural

Excellent diversification

The 3 months correlation between HDFC and Oil is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Oil Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Natural Gas 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 Oil Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Natural Gas has no effect on the direction of HDFC Bank i.e., HDFC Bank and Oil Natural go up and down completely randomly.

Pair Corralation between HDFC Bank and Oil Natural

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.79 times more return on investment than Oil Natural. However, HDFC Bank Limited is 1.26 times less risky than Oil Natural. It trades about 0.13 of its potential returns per unit of risk. Oil Natural Gas is currently generating about -0.23 per unit of risk. If you would invest  162,695  in HDFC Bank Limited on August 31, 2024 and sell it today you would earn a total of  16,620  from holding HDFC Bank Limited or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

HDFC Bank Limited  vs.  Oil Natural Gas

HDFC Bank Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Oil Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Natural Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HDFC Bank and Oil Natural

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

The idea behind HDFC Bank Limited and Oil Natural Gas 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.