Correlation Between HDFC Bank and Companhia Energtica

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

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

Diversification Opportunities for HDFC Bank and Companhia Energtica

-0.86

Correlation Coefficient

HDFC Bank  Companhia Energtica

Pay attention - limited upside

The 3 months correlation between HDFC and Companhia is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Companhia Energtica do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica and HDFC 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 HDFC Bank Limited are associated (or correlated) with Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of HDFC Bank i.e., HDFC Bank and Companhia Energtica go up and down completely randomly.

Pair Corralation between HDFC Bank and Companhia Energtica

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.76 times more return on investment than Companhia Energtica. However, HDFC Bank Limited is 1.32 times less risky than Companhia Energtica. It trades about 0.2 of its potential returns per unit of risk. Companhia Energtica do is currently generating about 0.0 per unit of risk. If you would invest  5,717  in HDFC Bank Limited on February 3, 2024 and sell it today you would earn a total of  330.00  from holding HDFC Bank Limited or generate 5.77% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Companhia Energtica do

HDFC Bank Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Companhia Energtica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Energtica do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HDFC Bank and Companhia Energtica

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

The idea behind HDFC Bank Limited and Companhia Energtica do 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..