Correlation Between HDFC Life and Rajnandini Metal

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

Diversification Opportunities for HDFC Life and Rajnandini Metal

0.57

Correlation Coefficient

HDFC Life  Rajnandini Metal

Very weak diversification

The 3 months correlation between HDFC and Rajnandini is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal 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 Rajnandini Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rajnandini Metal has no effect on the direction of HDFC Life i.e., HDFC Life and Rajnandini Metal go up and down completely randomly.

Pair Corralation between HDFC Life and Rajnandini Metal

Assuming the 90 days trading horizon HDFC Life Insurance is expected to generate 0.59 times more return on investment than Rajnandini Metal. However, HDFC Life Insurance is 1.69 times less risky than Rajnandini Metal. It trades about -0.24 of its potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.35 per unit of risk. If you would invest  65,770  in HDFC Life Insurance on September 29, 2024 and sell it today you would lose (3,580) from holding HDFC Life Insurance or give up 5.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

HDFC Life Insurance  vs.  Rajnandini Metal 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 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.

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary 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 Rajnandini Metal

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

The idea behind HDFC Life Insurance and Rajnandini Metal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.