Correlation Between HDFC Bank and Tangerine Beach

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

Diversification Opportunities for HDFC Bank and Tangerine Beach

0.59

Correlation Coefficient

HDFC Bank  Tangerine Beach

Very weak diversification

The 3 months correlation between HDFC and Tangerine is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank of and Tangerine Beach Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tangerine Beach Hotels 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 Tangerine Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tangerine Beach Hotels has no effect on the direction of HDFC Bank i.e., HDFC Bank and Tangerine Beach go up and down completely randomly.

Pair Corralation between HDFC Bank and Tangerine Beach

Assuming the 90 days trading horizon HDFC Bank of is expected to generate 1.71 times more return on investment than Tangerine Beach. However, HDFC Bank is 1.71 times more volatile than Tangerine Beach Hotels. It trades about 0.22 of its potential returns per unit of risk. Tangerine Beach Hotels is currently generating about 0.17 per unit of risk. If you would invest  3,400  in HDFC Bank of on October 7, 2024 and sell it today you would earn a total of  2,980  from holding HDFC Bank of or generate 87.65% return on investment over 90 days.

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

HDFC Bank of  vs.  Tangerine Beach Hotels

HDFC Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank of are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HDFC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Tangerine Beach Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Beach Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tangerine Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Tangerine Beach

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

The idea behind HDFC Bank of and Tangerine Beach Hotels 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.