Correlation Between Jindal Steel and HDFC Bank

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

By analyzing existing cross correlation between Jindal Steel Power and HDFC Bank Limited, you can compare the effects of market volatilities on Jindal Steel and HDFC Bank 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 Jindal Steel with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jindal Steel and HDFC Bank.

Diversification Opportunities for Jindal Steel and HDFC Bank

-0.32

Correlation Coefficient

Jindal Steel  HDFC Bank

Very good diversification

The 3 months correlation between Jindal and HDFC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Steel Power and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited and Jindal Steel 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 Jindal Steel Power are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of Jindal Steel i.e., Jindal Steel and HDFC Bank go up and down completely randomly.

Pair Corralation between Jindal Steel and HDFC Bank

Assuming the 90 days trading horizon Jindal Steel Power is expected to under-perform the HDFC Bank. In addition to that, Jindal Steel is 1.41 times more volatile than HDFC Bank Limited. It trades about -0.04 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.13 per unit of volatility. If you would invest  162,695  in HDFC Bank Limited on September 2, 2024 and sell it today you would earn a total of  16,910  from holding HDFC Bank Limited or generate 10.39% return on investment over 90 days.

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

Jindal Steel Power  vs.  HDFC Bank Limited

Jindal Steel Power

Risk-Adjusted Performance

0 of 100

Very Weak

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

HDFC Bank Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 10 (%) 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.

Pair Trading with Jindal Steel and HDFC Bank

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

The idea behind Jindal Steel Power and HDFC Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.