Correlation Between HDFC Life and Engineers India

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

Diversification Opportunities for HDFC Life and Engineers India

-0.3

Correlation Coefficient

HDFC Life  Engineers India

Very good diversification

The 3 months correlation between HDFC and Engineers is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Engineers India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engineers India 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 Engineers India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engineers India has no effect on the direction of HDFC Life i.e., HDFC Life and Engineers India go up and down completely randomly.

Pair Corralation between HDFC Life and Engineers India

Assuming the 90 days trading horizon HDFC Life Insurance is expected to generate 0.36 times more return on investment than Engineers India. However, HDFC Life Insurance is 2.8 times less risky than Engineers India. It trades about -0.32 of its potential returns per unit of risk. Engineers India Limited is currently generating about -0.27 per unit of risk. If you would invest  65,025  in HDFC Life Insurance on October 5, 2024 and sell it today you would lose (3,010) from holding HDFC Life Insurance or give up 4.63% of portfolio value over 90 days.

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

HDFC Life Insurance  vs.  Engineers India 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 unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Engineers India is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HDFC Life and Engineers India

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

The idea behind HDFC Life Insurance and Engineers India 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..