Correlation Between HDFC Bank and UTI Asset

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

Diversification Opportunities for HDFC Bank and UTI Asset

0.58

Correlation Coefficient

HDFC Bank  UTI Asset

Very weak diversification

The 3 months correlation between HDFC and UTI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and UTI Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTI Asset Management 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 UTI Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTI Asset Management has no effect on the direction of HDFC Bank i.e., HDFC Bank and UTI Asset go up and down completely randomly.

Pair Corralation between HDFC Bank and UTI Asset

Assuming the 90 days trading horizon HDFC Bank is expected to generate 1.59 times less return on investment than UTI Asset. But when comparing it to its historical volatility, HDFC Bank Limited is 2.37 times less risky than UTI Asset. It trades about 0.15 of its potential returns per unit of risk. UTI Asset Management is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  120,155  in UTI Asset Management on October 5, 2024 and sell it today you would earn a total of  19,075  from holding UTI Asset Management or generate 15.88% return on investment over 90 days.

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

HDFC Bank Limited  vs.  UTI Asset Management

HDFC Bank Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UTI Asset Management

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, UTI Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and UTI Asset

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

The idea behind HDFC Bank Limited and UTI Asset Management 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.