Correlation Between HDFC Life and Hindustan Foods

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

Diversification Opportunities for HDFC Life and Hindustan Foods

0.56

Correlation Coefficient

HDFC Life  Hindustan Foods

Very weak diversification

The 3 months correlation between HDFC and Hindustan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods 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 Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of HDFC Life i.e., HDFC Life and Hindustan Foods go up and down completely randomly.

Pair Corralation between HDFC Life and Hindustan Foods

Assuming the 90 days trading horizon HDFC Life Insurance is expected to generate 0.69 times more return on investment than Hindustan Foods. However, HDFC Life Insurance is 1.45 times less risky than Hindustan Foods. It trades about -0.1 of its potential returns per unit of risk. Hindustan Foods Limited is currently generating about -0.08 per unit of risk. If you would invest  69,880  in HDFC Life Insurance on September 18, 2024 and sell it today you would lose (6,385) from holding HDFC Life Insurance or give up 9.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

HDFC Life Insurance  vs.  Hindustan Foods 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 latest unfluctuating performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental 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 Life and Hindustan Foods

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

The idea behind HDFC Life Insurance and Hindustan Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.