Correlation Between HDFC Bank and First IC

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

Diversification Opportunities for HDFC Bank and First IC

0.73

Correlation Coefficient

HDFC Bank  First IC

Poor diversification

The 3 months correlation between HDFC and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC 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 First IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of HDFC Bank i.e., HDFC Bank and First IC go up and down completely randomly.

Pair Corralation between HDFC Bank and First IC

Considering the 90-day investment horizon HDFC Bank is expected to generate 1.81 times less return on investment than First IC. But when comparing it to its historical volatility, HDFC Bank Limited is 1.05 times less risky than First IC. It trades about 0.08 of its potential returns per unit of risk. First IC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,905  in First IC on May 6, 2025 and sell it today you would earn a total of  245.00  from holding First IC or generate 12.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

HDFC Bank Limited  vs.  First IC

HDFC Bank Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First IC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First IC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, First IC may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with HDFC Bank and First IC

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

The idea behind HDFC Bank Limited and First IC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.