Correlation Between State Trading and HDFC Asset

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

Diversification Opportunities for State Trading and HDFC Asset

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between State and HDFC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and HDFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Asset Management and State Trading 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 The State Trading are associated (or correlated) with HDFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Asset Management has no effect on the direction of State Trading i.e., State Trading and HDFC Asset go up and down completely randomly.

Pair Corralation between State Trading and HDFC Asset

Assuming the 90 days trading horizon The State Trading is expected to generate 2.67 times more return on investment than HDFC Asset. However, State Trading is 2.67 times more volatile than HDFC Asset Management. It trades about 0.08 of its potential returns per unit of risk. HDFC Asset Management is currently generating about -0.05 per unit of risk. If you would invest  14,364  in The State Trading on August 29, 2024 and sell it today you would earn a total of  869.00  from holding The State Trading or generate 6.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

The State Trading  vs.  HDFC Asset Management

 Performance 
       Timeline  
State Trading 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
HDFC Asset Management 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

State Trading and HDFC Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with State Trading and HDFC Asset

The main advantage of trading using opposite State Trading and HDFC Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Trading position performs unexpectedly, HDFC Asset 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 Asset will offset losses from the drop in HDFC Asset's long position.
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The idea behind The State Trading and HDFC Asset Management 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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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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