Correlation Between Yes Bank and HCL Technologies

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

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

Diversification Opportunities for Yes Bank and HCL Technologies

-0.41

Correlation Coefficient

Yes Bank  HCL Technologies

Very good diversification

The 3 months correlation between Yes and HCL is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Yes Bank 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 Yes 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 Yes Bank 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 Yes Bank i.e., Yes Bank and HCL Technologies go up and down completely randomly.

Pair Corralation between Yes Bank and HCL Technologies

Assuming the 90 days trading horizon Yes Bank Limited is expected to under-perform the HCL Technologies. In addition to that, Yes Bank is 1.34 times more volatile than HCL Technologies Limited. It trades about -0.1 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.15 per unit of volatility. If you would invest  158,795  in HCL Technologies Limited on September 21, 2024 and sell it today you would earn a total of  34,630  from holding HCL Technologies Limited or generate 21.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.05%
Values	Daily Returns

Yes Bank Limited  vs.  HCL Technologies Limited

Yes Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yes Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

HCL Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 11 (%) 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 Yes Bank and HCL Technologies

The main advantage of trading using opposite Yes Bank and HCL Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yes Bank 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 Yes Bank 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.