Correlation Between HDFC Bank and ONEOK
Can any of the company-specific risk be diversified away by investing in both HDFC Bank and ONEOK 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 ONEOK 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 ONEOK Inc, you can compare the effects of market volatilities on HDFC Bank and ONEOK 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 ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and ONEOK.
Diversification Opportunities for HDFC Bank and ONEOK
Poor diversification
The 3 months correlation between HDFC and ONEOK is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of HDFC Bank i.e., HDFC Bank and ONEOK go up and down completely randomly.
Pair Corralation between HDFC Bank and ONEOK
Assuming the 90 days trading horizon HDFC Bank is expected to generate 1.52 times less return on investment than ONEOK. In addition to that, HDFC Bank is 1.19 times more volatile than ONEOK Inc. It trades about 0.09 of its total potential returns per unit of risk. ONEOK Inc is currently generating about 0.15 per unit of volatility. If you would invest 18,977 in ONEOK Inc on September 1, 2024 and sell it today you would earn a total of 13,751 from holding ONEOK Inc or generate 72.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 83.68% |
| Values | Daily Returns |
HDFC Bank Limited vs. ONEOK Inc
Performance |
| Timeline |
| HDFC Bank Limited |
| ONEOK Inc |
HDFC Bank and ONEOK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HDFC Bank and ONEOK
The main advantage of trading using opposite HDFC Bank and ONEOK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, ONEOK 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 ONEOK will offset losses from the drop in ONEOK's long position.The idea behind HDFC Bank Limited and ONEOK Inc 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.| ONEOK vs. Paycom Software | ONEOK vs. Micron Technology | ONEOK vs. Charter Communications | ONEOK vs. Beyond Meat |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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