Correlation Between HDFC Bank and Community Health

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

Diversification Opportunities for HDFC Bank and Community Health

-0.04

Correlation Coefficient

HDFC Bank  Community Health

Good diversification

The 3 months correlation between HDFC and Community is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Community Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Health Systems 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 Community Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Health Systems has no effect on the direction of HDFC Bank i.e., HDFC Bank and Community Health go up and down completely randomly.

Pair Corralation between HDFC Bank and Community Health

Considering the 90-day investment horizon HDFC Bank Limited is expected to under-perform the Community Health. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 3.96 times less risky than Community Health. The stock trades about -0.05 of its potential returns per unit of risk. The Community Health Systems is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Community Health Systems on August 9, 2025 and sell it today you would earn a total of  125.00  from holding Community Health Systems or generate 51.02% 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.  Community Health Systems

HDFC Bank Limited

Risk-Adjusted Performance

Weakest

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, HDFC Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Community Health Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Health Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Community Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Community Health

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

The idea behind HDFC Bank Limited and Community Health Systems 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.

Check out your portfolio center.

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.