Correlation Between HDFC Life and Speciality Restaurants

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

Diversification Opportunities for HDFC Life and Speciality Restaurants

0.13

Correlation Coefficient

HDFC Life  Speciality Restaurants

Average diversification

The 3 months correlation between HDFC and Speciality is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Speciality Restaurants Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Speciality Restaurants 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 Speciality Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Speciality Restaurants has no effect on the direction of HDFC Life i.e., HDFC Life and Speciality Restaurants go up and down completely randomly.

Pair Corralation between HDFC Life and Speciality Restaurants

Assuming the 90 days trading horizon HDFC Life Insurance is expected to generate 0.49 times more return on investment than Speciality Restaurants. However, HDFC Life Insurance is 2.03 times less risky than Speciality Restaurants. It trades about 0.11 of its potential returns per unit of risk. Speciality Restaurants Limited is currently generating about -0.01 per unit of risk. If you would invest  61,740  in HDFC Life Insurance on December 28, 2024 and sell it today you would earn a total of  6,450  from holding HDFC Life Insurance or generate 10.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HDFC Life Insurance  vs.  Speciality Restaurants Limited

HDFC Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Life Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, HDFC Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Speciality Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Speciality Restaurants is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HDFC Life and Speciality Restaurants

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

The idea behind HDFC Life Insurance and Speciality Restaurants 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.