Correlation Between HDFC Life and State Bank

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

Diversification Opportunities for HDFC Life and State Bank

-0.62

Correlation Coefficient

HDFC Life  State Bank

Excellent diversification

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

Pair Corralation between HDFC Life and State Bank

Assuming the 90 days trading horizon HDFC Life Insurance is expected to under-perform the State Bank. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Life Insurance is 1.14 times less risky than State Bank. The stock trades about -0.16 of its potential returns per unit of risk. The State Bank of is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  79,825  in State Bank of on September 24, 2024 and sell it today you would earn a total of  1,375  from holding State Bank of or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

HDFC Life Insurance  vs.  State Bank of

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.

State Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HDFC Life and State Bank

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

The idea behind HDFC Life Insurance and State Bank of 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..