Correlation Between Shyam Metalics and HDFC Bank

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

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

Diversification Opportunities for Shyam Metalics and HDFC Bank

-0.43

Correlation Coefficient

Shyam Metalics  HDFC Bank

Very good diversification

The 3 months correlation between Shyam and HDFC is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Metalics and and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited and Shyam Metalics 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 Shyam Metalics and are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of Shyam Metalics i.e., Shyam Metalics and HDFC Bank go up and down completely randomly.

Pair Corralation between Shyam Metalics and HDFC Bank

Assuming the 90 days trading horizon Shyam Metalics and is expected to generate 1.88 times more return on investment than HDFC Bank. However, Shyam Metalics is 1.88 times more volatile than HDFC Bank Limited. It trades about 0.06 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.06 per unit of risk. If you would invest  61,591  in Shyam Metalics and on October 9, 2024 and sell it today you would earn a total of  16,514  from holding Shyam Metalics and or generate 26.81% return on investment over 90 days.

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

Shyam Metalics and  vs.  HDFC Bank Limited

Shyam Metalics

Risk-Adjusted Performance

0 of 100

Very Weak

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

HDFC Bank Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Shyam Metalics and HDFC Bank

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

The idea behind Shyam Metalics and and HDFC Bank 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.

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