Correlation Between HDFC Bank and Unifique Telecomunicaes

Can any of the company-specific risk be diversified away by investing in both HDFC Bank and Unifique Telecomunicaes 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 Unifique Telecomunicaes 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 Unifique Telecomunicaes SA, you can compare the effects of market volatilities on HDFC Bank and Unifique Telecomunicaes 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 Unifique Telecomunicaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of HDFC Bank and Unifique Telecomunicaes.

Diversification Opportunities for HDFC Bank and Unifique Telecomunicaes

0.27

Correlation Coefficient

HDFC Bank  Unifique Telecomunicaes

Modest diversification

The 3 months correlation between HDFC and Unifique is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Unifique Telecomunicaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unifique Telecomunicaes 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 Unifique Telecomunicaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unifique Telecomunicaes has no effect on the direction of HDFC Bank i.e., HDFC Bank and Unifique Telecomunicaes go up and down completely randomly.

Pair Corralation between HDFC Bank and Unifique Telecomunicaes

Assuming the 90 days trading horizon HDFC Bank Limited is expected to generate 1.28 times more return on investment than Unifique Telecomunicaes. However, HDFC Bank is 1.28 times more volatile than Unifique Telecomunicaes SA. It trades about 0.34 of its potential returns per unit of risk. Unifique Telecomunicaes SA is currently generating about -0.05 per unit of risk. If you would invest  6,418  in HDFC Bank Limited on August 31, 2024 and sell it today you would earn a total of  1,526  from holding HDFC Bank Limited or generate 23.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HDFC Bank Limited  vs.  Unifique Telecomunicaes SA

HDFC Bank Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 7 (%) 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.

Unifique Telecomunicaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unifique Telecomunicaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Unifique Telecomunicaes is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HDFC Bank and Unifique Telecomunicaes

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

The idea behind HDFC Bank Limited and Unifique Telecomunicaes SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.