Correlation Between HDFC Life and Computer Age

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

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

Diversification Opportunities for HDFC Life and Computer Age

-0.82

Correlation Coefficient

HDFC Life  Computer Age

Pay attention - limited upside

The 3 months correlation between HDFC and Computer is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Computer Age Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Age Management and HDFC Life 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 Life Insurance are associated (or correlated) with Computer Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Age Management has no effect on the direction of HDFC Life i.e., HDFC Life and Computer Age go up and down completely randomly.

Pair Corralation between HDFC Life and Computer Age

Assuming the 90 days trading horizon HDFC Life is expected to generate 7.02 times less return on investment than Computer Age. But when comparing it to its historical volatility, HDFC Life Insurance is 1.74 times less risky than Computer Age. It trades about 0.03 of its potential returns per unit of risk. Computer Age Management is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  361,759  in Computer Age Management on September 27, 2024 and sell it today you would earn a total of  131,111  from holding Computer Age Management or generate 36.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

HDFC Life Insurance  vs.  Computer Age Management

HDFC Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Computer Age Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HDFC Life and Computer Age

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

The idea behind HDFC Life Insurance and Computer Age Management 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.