Correlation Between HDFC Bank and Blue Jet

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

Diversification Opportunities for HDFC Bank and Blue Jet

0.43

Correlation Coefficient

HDFC Bank  Blue Jet

Very weak diversification

The 3 months correlation between HDFC and Blue is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Blue Jet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Jet Healthcare 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 Blue Jet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Jet Healthcare has no effect on the direction of HDFC Bank i.e., HDFC Bank and Blue Jet go up and down completely randomly.

Pair Corralation between HDFC Bank and Blue Jet

Assuming the 90 days trading horizon HDFC Bank is expected to generate 1.14 times less return on investment than Blue Jet. But when comparing it to its historical volatility, HDFC Bank Limited is 2.1 times less risky than Blue Jet. It trades about 0.12 of its potential returns per unit of risk. Blue Jet Healthcare is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  47,469  in Blue Jet Healthcare on September 3, 2024 and sell it today you would earn a total of  4,471  from holding Blue Jet Healthcare or generate 9.42% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Blue Jet Healthcare

HDFC Bank Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 9 (%) 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.

Blue Jet Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Jet Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, Blue Jet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HDFC Bank and Blue Jet

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

The idea behind HDFC Bank Limited and Blue Jet Healthcare 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.