Correlation Between Zomato and HDFC Bank

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

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

Diversification Opportunities for Zomato and HDFC Bank

0.86

Correlation Coefficient

Zomato  HDFC Bank

Very poor diversification

The 3 months correlation between Zomato and HDFC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Zomato Limited 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 Zomato 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 Zomato Limited 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 Zomato i.e., Zomato and HDFC Bank go up and down completely randomly.

Pair Corralation between Zomato and HDFC Bank

Assuming the 90 days trading horizon Zomato Limited is expected to generate 1.99 times more return on investment than HDFC Bank. However, Zomato is 1.99 times more volatile than HDFC Bank Limited. It trades about 0.13 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.02 per unit of risk. If you would invest  5,355  in Zomato Limited on December 8, 2024 and sell it today you would earn a total of  16,328  from holding Zomato Limited or generate 304.91% return on investment over 90 days.

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

Zomato Limited  vs.  HDFC Bank Limited

Zomato Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zomato Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HDFC Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Zomato and HDFC Bank

The main advantage of trading using opposite Zomato and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zomato 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 Zomato Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.