Correlation Between HDFC Bank and WESTLIFE FOODWORLD

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

Diversification Opportunities for HDFC Bank and WESTLIFE FOODWORLD

-0.34

Correlation Coefficient

HDFC Bank  WESTLIFE FOODWORLD

Very good diversification

The 3 months correlation between HDFC and WESTLIFE is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and WESTLIFE FOODWORLD LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLIFE FOODWORLD 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 WESTLIFE FOODWORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLIFE FOODWORLD has no effect on the direction of HDFC Bank i.e., HDFC Bank and WESTLIFE FOODWORLD go up and down completely randomly.

Pair Corralation between HDFC Bank and WESTLIFE FOODWORLD

Assuming the 90 days trading horizon HDFC Bank is expected to generate 2.16 times less return on investment than WESTLIFE FOODWORLD. But when comparing it to its historical volatility, HDFC Bank Limited is 2.01 times less risky than WESTLIFE FOODWORLD. It trades about 0.34 of its potential returns per unit of risk. WESTLIFE FOODWORLD LIMITED is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  69,990  in WESTLIFE FOODWORLD LIMITED on September 19, 2024 and sell it today you would earn a total of  11,670  from holding WESTLIFE FOODWORLD LIMITED or generate 16.67% 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.  WESTLIFE FOODWORLD LIMITED

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. In spite of very unfluctuating basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WESTLIFE FOODWORLD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTLIFE FOODWORLD LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WESTLIFE FOODWORLD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HDFC Bank and WESTLIFE FOODWORLD

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

The idea behind HDFC Bank Limited and WESTLIFE FOODWORLD 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.