Correlation Between HMT and HDFC Asset

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

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

Diversification Opportunities for HMT and HDFC Asset

0.39

Correlation Coefficient

HMT  HDFC Asset

Weak diversification

The 3 months correlation between HMT and HDFC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and HDFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Asset Management and HMT 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 HMT Limited are associated (or correlated) with HDFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Asset Management has no effect on the direction of HMT i.e., HMT and HDFC Asset go up and down completely randomly.

Pair Corralation between HMT and HDFC Asset

Assuming the 90 days trading horizon HMT Limited is expected to under-perform the HDFC Asset. In addition to that, HMT is 1.47 times more volatile than HDFC Asset Management. It trades about -0.14 of its total potential returns per unit of risk. HDFC Asset Management is currently generating about -0.04 per unit of volatility. If you would invest  451,435  in HDFC Asset Management on September 5, 2024 and sell it today you would lose (25,605) from holding HDFC Asset Management or give up 5.67% of portfolio value over 90 days.

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

HMT Limited  vs.  HDFC Asset Management

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HDFC Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HMT and HDFC Asset

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

The idea behind HMT Limited and HDFC Asset Management 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.