Correlation Between HDFC Life and Karur Vysya

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

Diversification Opportunities for HDFC Life and Karur Vysya

-0.62

Correlation Coefficient

HDFC Life  Karur Vysya

Excellent diversification

The 3 months correlation between HDFC and Karur is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Karur Vysya Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karur Vysya Bank 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 Karur Vysya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karur Vysya Bank has no effect on the direction of HDFC Life i.e., HDFC Life and Karur Vysya go up and down completely randomly.

Pair Corralation between HDFC Life and Karur Vysya

Assuming the 90 days trading horizon HDFC Life is expected to generate 2.15 times less return on investment than Karur Vysya. But when comparing it to its historical volatility, HDFC Life Insurance is 1.19 times less risky than Karur Vysya. It trades about 0.03 of its potential returns per unit of risk. Karur Vysya Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,475  in Karur Vysya Bank on September 29, 2024 and sell it today you would earn a total of  1,799  from holding Karur Vysya Bank or generate 8.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

HDFC Life Insurance  vs.  Karur Vysya Bank

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 weak 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.

Karur Vysya Bank

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Karur Vysya Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Karur Vysya is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HDFC Life and Karur Vysya

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

The idea behind HDFC Life Insurance and Karur Vysya Bank 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.