Correlation Between China Merchants and HDFC Bank
Can any of the company-specific risk be diversified away by investing in both China Merchants and HDFC Bank 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 China Merchants and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Merchants Bank and HDFC Bank Limited, you can compare the effects of market volatilities on China Merchants and HDFC Bank 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 China Merchants with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and HDFC Bank.
Diversification Opportunities for China Merchants and HDFC Bank
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and HDFC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited and China Merchants 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 China Merchants Bank are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of China Merchants i.e., China Merchants and HDFC Bank go up and down completely randomly.
Pair Corralation between China Merchants and HDFC Bank
Assuming the 90 days horizon China Merchants is expected to generate 12.45 times less return on investment than HDFC Bank. In addition to that, China Merchants is 1.25 times more volatile than HDFC Bank Limited. It trades about 0.01 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.09 per unit of volatility. If you would invest 5,750 in HDFC Bank Limited on September 23, 2024 and sell it today you would earn a total of 350.00 from holding HDFC Bank Limited or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. HDFC Bank Limited
Performance |
| Timeline |
| China Merchants Bank |
| HDFC Bank Limited |
China Merchants and HDFC Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and HDFC Bank
The main advantage of trading using opposite China Merchants and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, HDFC Bank 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 HDFC Bank will offset losses from the drop in HDFC Bank's long position.| China Merchants vs. HDFC Bank Limited | China Merchants vs. ICICI Bank Limited | China Merchants vs. PT Bank Central | China Merchants vs. DBS Group Holdings |
| HDFC Bank vs. China Merchants Bank | HDFC Bank vs. ICICI Bank Limited | HDFC Bank vs. PT Bank Central | HDFC Bank vs. DBS Group Holdings |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |