Correlation Between HDFC Bank and Extra Space
Can any of the company-specific risk be diversified away by investing in both HDFC Bank and Extra Space 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 Extra Space 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 Extra Space Storage, you can compare the effects of market volatilities on HDFC Bank and Extra Space 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 Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Extra Space.
Diversification Opportunities for HDFC Bank and Extra Space
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HDFC and Extra is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage 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 Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of HDFC Bank i.e., HDFC Bank and Extra Space go up and down completely randomly.
Pair Corralation between HDFC Bank and Extra Space
Assuming the 90 days trading horizon HDFC Bank is expected to generate 1.38 times less return on investment than Extra Space. In addition to that, HDFC Bank is 1.01 times more volatile than Extra Space Storage. It trades about 0.02 of its total potential returns per unit of risk. Extra Space Storage is currently generating about 0.03 per unit of volatility. If you would invest 19,300 in Extra Space Storage on September 24, 2024 and sell it today you would earn a total of 3,240 from holding Extra Space Storage or generate 16.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 80.57% |
Values | Daily Returns |
HDFC Bank Limited vs. Extra Space Storage
Performance |
Timeline |
HDFC Bank Limited |
Extra Space Storage |
HDFC Bank and Extra Space Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HDFC Bank and Extra Space
The main advantage of trading using opposite HDFC Bank and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.HDFC Bank vs. Ita Unibanco Holding | HDFC Bank vs. Ita Unibanco Holding | HDFC Bank vs. Deutsche Bank Aktiengesellschaft | HDFC Bank vs. Banco Bradesco SA |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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