Correlation Between Singhe Hospitals and HDFC Bank

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

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

Diversification Opportunities for Singhe Hospitals and HDFC Bank

0.62

Correlation Coefficient

Singhe Hospitals  HDFC Bank

Poor diversification

The 3 months correlation between Singhe and HDFC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Singhe Hospitals and HDFC Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank and Singhe Hospitals 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 Singhe Hospitals 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 has no effect on the direction of Singhe Hospitals i.e., Singhe Hospitals and HDFC Bank go up and down completely randomly.

Pair Corralation between Singhe Hospitals and HDFC Bank

Assuming the 90 days trading horizon Singhe Hospitals is expected to generate 3.56 times less return on investment than HDFC Bank. But when comparing it to its historical volatility, Singhe Hospitals is 1.88 times less risky than HDFC Bank. It trades about 0.04 of its potential returns per unit of risk. HDFC Bank of is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,840  in HDFC Bank of on December 26, 2024 and sell it today you would earn a total of  580.00  from holding HDFC Bank of or generate 15.1% return on investment over 90 days.

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

Singhe Hospitals  vs.  HDFC Bank of

Singhe Hospitals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Singhe Hospitals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Singhe Hospitals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HDFC Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HDFC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singhe Hospitals and HDFC Bank

The main advantage of trading using opposite Singhe Hospitals and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singhe Hospitals 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 Singhe Hospitals and HDFC Bank of 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.