Correlation Between Baazar Style and HDFC Bank

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

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

Diversification Opportunities for Baazar Style and HDFC Bank

-0.27

Correlation Coefficient

Baazar Style  HDFC Bank

Very good diversification

The 3 months correlation between Baazar and HDFC is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Baazar Style Retail 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 Baazar Style 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 Baazar Style Retail 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 Baazar Style i.e., Baazar Style and HDFC Bank go up and down completely randomly.

Pair Corralation between Baazar Style and HDFC Bank

Assuming the 90 days trading horizon Baazar Style Retail is expected to under-perform the HDFC Bank. In addition to that, Baazar Style is 2.57 times more volatile than HDFC Bank Limited. It trades about -0.05 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.02 per unit of volatility. If you would invest  178,345  in HDFC Bank Limited on September 26, 2024 and sell it today you would earn a total of  1,465  from holding HDFC Bank Limited or generate 0.82% return on investment over 90 days.

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

Baazar Style Retail  vs.  HDFC Bank Limited

Baazar Style Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baazar Style Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HDFC Bank Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Baazar Style and HDFC Bank

The main advantage of trading using opposite Baazar Style and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baazar Style 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 Baazar Style Retail 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.