Correlation Between HDFC Bank and Capital One
Can any of the company-specific risk be diversified away by investing in both HDFC Bank and Capital One 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 Capital One 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 Capital One Financial, you can compare the effects of market volatilities on HDFC Bank and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Capital One.
Diversification Opportunities for HDFC Bank and Capital One
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HDFC and Capital is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of HDFC Bank i.e., HDFC Bank and Capital One go up and down completely randomly.
Pair Corralation between HDFC Bank and Capital One
Assuming the 90 days trading horizon HDFC Bank is expected to generate 1.63 times less return on investment than Capital One. In addition to that, HDFC Bank is 1.1 times more volatile than Capital One Financial. It trades about 0.17 of its total potential returns per unit of risk. Capital One Financial is currently generating about 0.3 per unit of volatility. If you would invest 39,860 in Capital One Financial on August 30, 2024 and sell it today you would earn a total of 16,868 from holding Capital One Financial or generate 42.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HDFC Bank Limited vs. Capital One Financial
Performance |
| Timeline |
| HDFC Bank Limited |
| Capital One Financial |
HDFC Bank and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HDFC Bank and Capital One
The main advantage of trading using opposite HDFC Bank and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.The idea behind HDFC Bank Limited and Capital One Financial 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.| Capital One vs. Mastercard Incorporated | Capital One vs. Credit Acceptance | Capital One vs. Financeira Alfa SA |
Check out your portfolio center.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |