Correlation Between IDBI Bank and Geojit Financial

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

By analyzing existing cross correlation between IDBI Bank Limited and Geojit Financial Services, you can compare the effects of market volatilities on IDBI Bank and Geojit Financial 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 IDBI Bank with a short position of Geojit Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDBI Bank and Geojit Financial.

Diversification Opportunities for IDBI Bank and Geojit Financial

0.73

Correlation Coefficient

IDBI Bank  Geojit Financial

Poor diversification

The 3 months correlation between IDBI and Geojit is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding IDBI Bank Limited and Geojit Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geojit Financial Services and IDBI 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 IDBI Bank Limited are associated (or correlated) with Geojit Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geojit Financial Services has no effect on the direction of IDBI Bank i.e., IDBI Bank and Geojit Financial go up and down completely randomly.

Pair Corralation between IDBI Bank and Geojit Financial

Assuming the 90 days trading horizon IDBI Bank Limited is expected to generate 0.54 times more return on investment than Geojit Financial. However, IDBI Bank Limited is 1.86 times less risky than Geojit Financial. It trades about -0.08 of its potential returns per unit of risk. Geojit Financial Services is currently generating about -0.08 per unit of risk. If you would invest  9,373  in IDBI Bank Limited on September 3, 2024 and sell it today you would lose (1,174) from holding IDBI Bank Limited or give up 12.53% of portfolio value over 90 days.

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

IDBI Bank Limited  vs.  Geojit Financial Services

IDBI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDBI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Geojit Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geojit Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with IDBI Bank and Geojit Financial

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

The idea behind IDBI Bank Limited and Geojit Financial Services 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.