Correlation Between HDFC Bank and LUMI GRUPPEN
Can any of the company-specific risk be diversified away by investing in both HDFC Bank and LUMI GRUPPEN 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 LUMI GRUPPEN 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 LUMI GRUPPEN AS, you can compare the effects of market volatilities on HDFC Bank and LUMI GRUPPEN 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 LUMI GRUPPEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and LUMI GRUPPEN.
Diversification Opportunities for HDFC Bank and LUMI GRUPPEN
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HDFC and LUMI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and LUMI GRUPPEN AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUMI GRUPPEN AS 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 LUMI GRUPPEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUMI GRUPPEN AS has no effect on the direction of HDFC Bank i.e., HDFC Bank and LUMI GRUPPEN go up and down completely randomly.
Pair Corralation between HDFC Bank and LUMI GRUPPEN
Assuming the 90 days trading horizon HDFC Bank is expected to generate 16.95 times less return on investment than LUMI GRUPPEN. But when comparing it to its historical volatility, HDFC Bank Limited is 3.92 times less risky than LUMI GRUPPEN. It trades about 0.03 of its potential returns per unit of risk. LUMI GRUPPEN AS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 85.00 in LUMI GRUPPEN AS on September 24, 2024 and sell it today you would earn a total of 13.00 from holding LUMI GRUPPEN AS or generate 15.29% 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. LUMI GRUPPEN AS
Performance |
| Timeline |
| HDFC Bank Limited |
| LUMI GRUPPEN AS |
HDFC Bank and LUMI GRUPPEN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HDFC Bank and LUMI GRUPPEN
The main advantage of trading using opposite HDFC Bank and LUMI GRUPPEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, LUMI GRUPPEN 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 LUMI GRUPPEN will offset losses from the drop in LUMI GRUPPEN's long position.| HDFC Bank vs. China Merchants Bank | HDFC Bank vs. ICICI Bank Limited | HDFC Bank vs. PT Bank Central | HDFC Bank vs. DBS Group Holdings |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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