Correlation Between HDFC Bank and BeiGene

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

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

Diversification Opportunities for HDFC Bank and BeiGene

-0.38

Correlation Coefficient

HDFC Bank  BeiGene

Very good diversification

The 3 months correlation between HDFC and BeiGene is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and HDFC Bank 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 HDFC Bank Limited are associated (or correlated) with BeiGene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BeiGene has no effect on the direction of HDFC Bank i.e., HDFC Bank and BeiGene go up and down completely randomly.

Pair Corralation between HDFC Bank and BeiGene

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 0.96 times more return on investment than BeiGene. However, HDFC Bank Limited is 1.04 times less risky than BeiGene. It trades about 0.14 of its potential returns per unit of risk. BeiGene is currently generating about -0.02 per unit of risk. If you would invest  6,462  in HDFC Bank Limited on September 24, 2024 and sell it today you would earn a total of  1,554  from holding HDFC Bank Limited or generate 24.05% return on investment over 90 days.

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

HDFC Bank Limited  vs.  BeiGene

HDFC Bank Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, HDFC Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

BeiGene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BeiGene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, BeiGene is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HDFC Bank and BeiGene

The main advantage of trading using opposite HDFC Bank and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, BeiGene 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 BeiGene will offset losses from the drop in BeiGene's long position.

The idea behind HDFC Bank Limited and BeiGene 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.