Correlation Between HDFC Life and Jindal Poly

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

Diversification Opportunities for HDFC Life and Jindal Poly

-0.76

Correlation Coefficient

HDFC Life  Jindal Poly

Pay attention - limited upside

The 3 months correlation between HDFC and Jindal is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Jindal Poly Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Poly Investment 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 Jindal Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Poly Investment has no effect on the direction of HDFC Life i.e., HDFC Life and Jindal Poly go up and down completely randomly.

Pair Corralation between HDFC Life and Jindal Poly

Assuming the 90 days trading horizon HDFC Life Insurance is expected to under-perform the Jindal Poly. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Life Insurance is 1.67 times less risky than Jindal Poly. The stock trades about -0.3 of its potential returns per unit of risk. The Jindal Poly Investment is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  98,110  in Jindal Poly Investment on September 27, 2024 and sell it today you would lose (7,235) from holding Jindal Poly Investment or give up 7.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

HDFC Life Insurance  vs.  Jindal Poly Investment

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 unsteady 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.

Jindal Poly Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Poly Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Jindal Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Life and Jindal Poly

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

The idea behind HDFC Life Insurance and Jindal Poly Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.