Correlation Between HDFC Bank and Chevron Corp

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

Diversification Opportunities for HDFC Bank and Chevron Corp

0.56

Correlation Coefficient

HDFC Bank  Chevron Corp

Very weak diversification

The 3 months correlation between HDFC and Chevron is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of HDFC Bank i.e., HDFC Bank and Chevron Corp go up and down completely randomly.

Pair Corralation between HDFC Bank and Chevron Corp

Considering the 90-day investment horizon HDFC Bank is expected to generate 1.64 times less return on investment than Chevron Corp. In addition to that, HDFC Bank is 1.34 times more volatile than Chevron Corp. It trades about 0.07 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.16 per unit of volatility. If you would invest  14,809  in Chevron Corp on March 5, 2024 and sell it today you would earn a total of  1,421  from holding Chevron Corp or generate 9.6% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Chevron Corp

HDFC Bank Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, HDFC Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with HDFC Bank and Chevron Corp

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

The idea behind HDFC Bank Limited and Chevron Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.