Correlation Between Annaly Capital and HDFC Bank
Can any of the company-specific risk be diversified away by investing in both Annaly Capital 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 Annaly Capital and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management, and HDFC Bank Limited, you can compare the effects of market volatilities on Annaly Capital 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 Annaly Capital with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and HDFC Bank.
Diversification Opportunities for Annaly Capital and HDFC Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Annaly and HDFC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management, 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 Annaly Capital 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 Annaly Capital Management, 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 Annaly Capital i.e., Annaly Capital and HDFC Bank go up and down completely randomly.
Pair Corralation between Annaly Capital and HDFC Bank
Assuming the 90 days trading horizon Annaly Capital Management, is expected to generate 0.58 times more return on investment than HDFC Bank. However, Annaly Capital Management, is 1.72 times less risky than HDFC Bank. It trades about 0.11 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.03 per unit of risk. If you would invest 8,412 in Annaly Capital Management, on October 30, 2024 and sell it today you would earn a total of 3,188 from holding Annaly Capital Management, or generate 37.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 75.56% |
Values | Daily Returns |
Annaly Capital Management, vs. HDFC Bank Limited
Performance |
Timeline |
Annaly Capital Manag |
HDFC Bank Limited |
Annaly Capital and HDFC Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Annaly Capital and HDFC Bank
The main advantage of trading using opposite Annaly Capital and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital 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.Annaly Capital vs. Air Products and | ||
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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