Correlation Between Hang Seng and Delhi Bank

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

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

Diversification Opportunities for Hang Seng and Delhi Bank

0.78

Correlation Coefficient

Hang Seng  Delhi Bank

Poor diversification

The 3 months correlation between Hang and Delhi is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and Delhi Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delhi Bank Corp and Hang Seng 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 Hang Seng Bank are associated (or correlated) with Delhi Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delhi Bank Corp has no effect on the direction of Hang Seng i.e., Hang Seng and Delhi Bank go up and down completely randomly.

Pair Corralation between Hang Seng and Delhi Bank

Assuming the 90 days horizon Hang Seng Bank is expected to generate 11.19 times more return on investment than Delhi Bank. However, Hang Seng is 11.19 times more volatile than Delhi Bank Corp. It trades about 0.13 of its potential returns per unit of risk. Delhi Bank Corp is currently generating about 0.17 per unit of risk. If you would invest  1,210  in Hang Seng Bank on December 28, 2024 and sell it today you would earn a total of  166.00  from holding Hang Seng Bank or generate 13.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Hang Seng Bank  vs.  Delhi Bank Corp

Hang Seng Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hang Seng showed solid returns over the last few months and may actually be approaching a breakup point.

Delhi Bank Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delhi Bank Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Delhi Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hang Seng and Delhi Bank

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

The idea behind Hang Seng Bank and Delhi Bank Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.