Correlation Between Cyber Media and HDFC Bank

Can any of the company-specific risk be diversified away by investing in both Cyber Media 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 Cyber Media and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cyber Media Research and HDFC Bank Limited, you can compare the effects of market volatilities on Cyber Media 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 Cyber Media with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cyber Media and HDFC Bank.

Diversification Opportunities for Cyber Media and HDFC Bank

-0.12

Correlation Coefficient

Cyber Media  HDFC Bank

Good diversification

The 3 months correlation between Cyber and HDFC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Cyber Media Research 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 Cyber Media 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 Cyber Media Research 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 Cyber Media i.e., Cyber Media and HDFC Bank go up and down completely randomly.

Pair Corralation between Cyber Media and HDFC Bank

Assuming the 90 days trading horizon Cyber Media Research is expected to under-perform the HDFC Bank. In addition to that, Cyber Media is 3.31 times more volatile than HDFC Bank Limited. It trades about -0.04 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.11 per unit of volatility. If you would invest  159,690  in HDFC Bank Limited on September 12, 2024 and sell it today you would earn a total of  27,120  from holding HDFC Bank Limited or generate 16.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cyber Media Research  vs.  HDFC Bank Limited

Cyber Media Research

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cyber Media Research are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Cyber Media displayed solid returns over the last few months and may actually be approaching a breakup point.

HDFC Bank Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cyber Media and HDFC Bank

The main advantage of trading using opposite Cyber Media and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cyber Media 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.

The idea behind Cyber Media Research and HDFC Bank 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.