Correlation Between HDFC Bank and Ratnamani Metals

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

Diversification Opportunities for HDFC Bank and Ratnamani Metals

-0.61

Correlation Coefficient

HDFC Bank  Ratnamani Metals

Excellent diversification

The 3 months correlation between HDFC and Ratnamani is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Ratnamani Metals Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratnamani Metals Tubes 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 Ratnamani Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratnamani Metals Tubes has no effect on the direction of HDFC Bank i.e., HDFC Bank and Ratnamani Metals go up and down completely randomly.

Pair Corralation between HDFC Bank and Ratnamani Metals

Assuming the 90 days trading horizon HDFC Bank is expected to generate 3.65 times less return on investment than Ratnamani Metals. But when comparing it to its historical volatility, HDFC Bank Limited is 1.55 times less risky than Ratnamani Metals. It trades about 0.03 of its potential returns per unit of risk. Ratnamani Metals Tubes is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  190,552  in Ratnamani Metals Tubes on October 4, 2024 and sell it today you would earn a total of  127,273  from holding Ratnamani Metals Tubes or generate 66.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

HDFC Bank Limited  vs.  Ratnamani Metals Tubes

HDFC Bank Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ratnamani Metals Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with HDFC Bank and Ratnamani Metals

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

The idea behind HDFC Bank Limited and Ratnamani Metals Tubes 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.