Correlation Between Yes Bank and IDFC First

Can any of the company-specific risk be diversified away by investing in both Yes Bank and IDFC First 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 IDFC First 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 IDFC First Bank, you can compare the effects of market volatilities on Yes Bank and IDFC First 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 IDFC First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yes Bank and IDFC First.

Diversification Opportunities for Yes Bank and IDFC First

0.84

Correlation Coefficient

Yes Bank  IDFC First

Very poor diversification

The 3 months correlation between Yes and IDFC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Yes Bank Limited and IDFC First Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDFC First Bank 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 IDFC First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDFC First Bank has no effect on the direction of Yes Bank i.e., Yes Bank and IDFC First go up and down completely randomly.

Pair Corralation between Yes Bank and IDFC First

Assuming the 90 days trading horizon Yes Bank Limited is expected to generate 1.13 times more return on investment than IDFC First. However, Yes Bank is 1.13 times more volatile than IDFC First Bank. It trades about -0.07 of its potential returns per unit of risk. IDFC First Bank is currently generating about -0.1 per unit of risk. If you would invest  2,343  in Yes Bank Limited on September 12, 2024 and sell it today you would lose (183.00) from holding Yes Bank Limited or give up 7.81% of portfolio value over 90 days.

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

Yes Bank Limited  vs.  IDFC First Bank

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.

IDFC First Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDFC First Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Yes Bank and IDFC First

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

The idea behind Yes Bank Limited and IDFC First Bank 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.