Correlation Between HDFC Life and United Breweries

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Can any of the company-specific risk be diversified away by investing in both HDFC Life and United Breweries 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 Life and United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HDFC Life Insurance and United Breweries Limited, you can compare the effects of market volatilities on HDFC Life and United Breweries 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 Life with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Life and United Breweries.

Diversification Opportunities for HDFC Life and United Breweries

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HDFC and United is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and HDFC Life 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 Life Insurance are associated (or correlated) with United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of HDFC Life i.e., HDFC Life and United Breweries go up and down completely randomly.

Pair Corralation between HDFC Life and United Breweries

Assuming the 90 days trading horizon HDFC Life is expected to generate 1.0 times less return on investment than United Breweries. But when comparing it to its historical volatility, HDFC Life Insurance is 1.04 times less risky than United Breweries. It trades about 0.05 of its potential returns per unit of risk. United Breweries Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  203,700  in United Breweries Limited on November 1, 2024 and sell it today you would earn a total of  3,620  from holding United Breweries Limited or generate 1.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HDFC Life Insurance  vs.  United Breweries Limited

 Performance 
       Timeline  
HDFC Life Insurance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HDFC Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
United Breweries 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, United Breweries may actually be approaching a critical reversion point that can send shares even higher in March 2025.

HDFC Life and United Breweries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HDFC Life and United Breweries

The main advantage of trading using opposite HDFC Life and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Life position performs unexpectedly, United Breweries 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 United Breweries will offset losses from the drop in United Breweries' long position.
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The idea behind HDFC Life Insurance and United Breweries Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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