Correlation Between HDFC Bank and PagSeguro Digital
Can any of the company-specific risk be diversified away by investing in both HDFC Bank and PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital, you can compare the effects of market volatilities on HDFC Bank and PagSeguro Digital 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 PagSeguro Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and PagSeguro Digital.
Diversification Opportunities for HDFC Bank and PagSeguro Digital
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HDFC and PagSeguro is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital 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 PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of HDFC Bank i.e., HDFC Bank and PagSeguro Digital go up and down completely randomly.
Pair Corralation between HDFC Bank and PagSeguro Digital
Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.4 times more return on investment than PagSeguro Digital. However, HDFC Bank Limited is 2.51 times less risky than PagSeguro Digital. It trades about 0.31 of its potential returns per unit of risk. PagSeguro Digital is currently generating about -0.02 per unit of risk. If you would invest 7,322 in HDFC Bank Limited on September 1, 2024 and sell it today you would earn a total of 622.00 from holding HDFC Bank Limited or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HDFC Bank Limited vs. PagSeguro Digital
Performance |
| Timeline |
| HDFC Bank Limited |
| PagSeguro Digital |
HDFC Bank and PagSeguro Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HDFC Bank and PagSeguro Digital
The main advantage of trading using opposite HDFC Bank and PagSeguro Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, PagSeguro Digital 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 PagSeguro Digital will offset losses from the drop in PagSeguro Digital's long position.The idea behind HDFC Bank Limited and PagSeguro Digital 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.| PagSeguro Digital vs. Spotify Technology SA | PagSeguro Digital vs. Paycom Software | PagSeguro Digital vs. Mitsubishi UFJ Financial | PagSeguro Digital vs. Dell Technologies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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