Correlation Between HDFC Bank and Zomato

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

Diversification Opportunities for HDFC Bank and Zomato

0.86

Correlation Coefficient

HDFC Bank  Zomato

Very poor diversification

The 3 months correlation between HDFC and Zomato is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Zomato Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomato Limited 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 Zomato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomato Limited has no effect on the direction of HDFC Bank i.e., HDFC Bank and Zomato go up and down completely randomly.

Pair Corralation between HDFC Bank and Zomato

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.36 times more return on investment than Zomato. However, HDFC Bank Limited is 2.79 times less risky than Zomato. It trades about -0.14 of its potential returns per unit of risk. Zomato Limited is currently generating about -0.15 per unit of risk. If you would invest  187,000  in HDFC Bank Limited on December 8, 2024 and sell it today you would lose (18,075) from holding HDFC Bank Limited or give up 9.67% of portfolio value over 90 days.

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

HDFC Bank Limited  vs.  Zomato Limited

HDFC Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Zomato Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zomato Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HDFC Bank and Zomato

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

The idea behind HDFC Bank Limited and Zomato 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.