Correlation Between HDFC Life and COSMO FIRST

Can any of the company-specific risk be diversified away by investing in both HDFC Life and COSMO FIRST 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 Life and COSMO FIRST into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HDFC Life Insurance and COSMO FIRST LIMITED, you can compare the effects of market volatilities on HDFC Life and COSMO FIRST 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 Life with a short position of COSMO FIRST. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Life and COSMO FIRST.

Diversification Opportunities for HDFC Life and COSMO FIRST

-0.79

Correlation Coefficient

HDFC Life  COSMO FIRST

Pay attention - limited upside

The 3 months correlation between HDFC and COSMO is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and COSMO FIRST LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMO FIRST LIMITED and HDFC Life 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 Life Insurance are associated (or correlated) with COSMO FIRST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMO FIRST LIMITED has no effect on the direction of HDFC Life i.e., HDFC Life and COSMO FIRST go up and down completely randomly.

Pair Corralation between HDFC Life and COSMO FIRST

Assuming the 90 days trading horizon HDFC Life Insurance is expected to under-perform the COSMO FIRST. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Life Insurance is 2.19 times less risky than COSMO FIRST. The stock trades about -0.16 of its potential returns per unit of risk. The COSMO FIRST LIMITED is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  78,190  in COSMO FIRST LIMITED on September 25, 2024 and sell it today you would earn a total of  14,135  from holding COSMO FIRST LIMITED or generate 18.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

HDFC Life Insurance  vs.  COSMO FIRST LIMITED

HDFC Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Life Insurance 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 forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

COSMO FIRST LIMITED

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Life and COSMO FIRST

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

The idea behind HDFC Life Insurance and COSMO FIRST 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.