Correlation Between HDFC Bank and Ceylinco Insurance

Can any of the company-specific risk be diversified away by investing in both HDFC Bank and Ceylinco Insurance 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 Bank and Ceylinco Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HDFC Bank of and Ceylinco Insurance PLC, you can compare the effects of market volatilities on HDFC Bank and Ceylinco Insurance 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 Bank with a short position of Ceylinco Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Ceylinco Insurance.

Diversification Opportunities for HDFC Bank and Ceylinco Insurance

-0.27

Correlation Coefficient

HDFC Bank  Ceylinco Insurance

Very good diversification

The 3 months correlation between HDFC and Ceylinco is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank of and Ceylinco Insurance PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylinco Insurance PLC and HDFC Bank 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 Bank of are associated (or correlated) with Ceylinco Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylinco Insurance PLC has no effect on the direction of HDFC Bank i.e., HDFC Bank and Ceylinco Insurance go up and down completely randomly.

Pair Corralation between HDFC Bank and Ceylinco Insurance

Assuming the 90 days trading horizon HDFC Bank of is expected to generate 1.73 times more return on investment than Ceylinco Insurance. However, HDFC Bank is 1.73 times more volatile than Ceylinco Insurance PLC. It trades about 0.04 of its potential returns per unit of risk. Ceylinco Insurance PLC is currently generating about 0.03 per unit of risk. If you would invest  2,410  in HDFC Bank of on September 14, 2024 and sell it today you would earn a total of  990.00  from holding HDFC Bank of or generate 41.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.44%
Values	Daily Returns

HDFC Bank of  vs.  Ceylinco Insurance PLC

HDFC Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ceylinco Insurance PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylinco Insurance PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylinco Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Ceylinco Insurance

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

The idea behind HDFC Bank of and Ceylinco Insurance PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..