Correlation Between STMicroelectronics and HDFC Bank
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and HDFC Bank Limited, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and HDFC Bank.
Diversification Opportunities for STMicroelectronics and HDFC Bank
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and HDFC is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV 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 STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and HDFC Bank go up and down completely randomly.
Pair Corralation between STMicroelectronics and HDFC Bank
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the HDFC Bank. In addition to that, STMicroelectronics is 1.61 times more volatile than HDFC Bank Limited. It trades about -0.18 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.28 per unit of volatility. If you would invest 7,395 in HDFC Bank Limited on September 2, 2024 and sell it today you would earn a total of 549.00 from holding HDFC Bank Limited or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. HDFC Bank Limited
Performance |
| Timeline |
| STMicroelectronics |
| HDFC Bank Limited |
STMicroelectronics and HDFC Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and HDFC Bank
The main advantage of trading using opposite STMicroelectronics and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Zoom Video Communications | STMicroelectronics vs. Apartment Investment and | STMicroelectronics vs. Charter Communications | STMicroelectronics vs. Telecomunicaes Brasileiras SA |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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