Correlation Between Vodafone Idea and HCL Technologies

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

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

Diversification Opportunities for Vodafone Idea and HCL Technologies

-0.56

Correlation Coefficient

Vodafone Idea  HCL Technologies

Excellent diversification

The 3 months correlation between Vodafone and HCL is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Idea Limited and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and Vodafone Idea 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 Vodafone Idea Limited are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of Vodafone Idea i.e., Vodafone Idea and HCL Technologies go up and down completely randomly.

Pair Corralation between Vodafone Idea and HCL Technologies

Assuming the 90 days trading horizon Vodafone Idea Limited is expected to under-perform the HCL Technologies. In addition to that, Vodafone Idea is 1.91 times more volatile than HCL Technologies Limited. It trades about -0.32 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.13 per unit of volatility. If you would invest  184,805  in HCL Technologies Limited on September 30, 2024 and sell it today you would earn a total of  4,395  from holding HCL Technologies Limited or generate 2.38% return on investment over 90 days.

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

Vodafone Idea Limited  vs.  HCL Technologies Limited

Vodafone Idea Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Idea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

HCL Technologies

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Vodafone Idea and HCL Technologies

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

The idea behind Vodafone Idea Limited and HCL Technologies Limited 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.