Correlation Between HDFC Bank and Intact Financial

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

Diversification Opportunities for HDFC Bank and Intact Financial

0.33

Correlation Coefficient

HDFC Bank  Intact Financial

Weak diversification

The 3 months correlation between HDFC and Intact is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of HDFC Bank i.e., HDFC Bank and Intact Financial go up and down completely randomly.

Pair Corralation between HDFC Bank and Intact Financial

Considering the 90-day investment horizon HDFC Bank Limited is expected to generate 0.99 times more return on investment than Intact Financial. However, HDFC Bank Limited is 1.01 times less risky than Intact Financial. It trades about 0.08 of its potential returns per unit of risk. Intact Financial is currently generating about -0.08 per unit of risk. If you would invest  7,277  in HDFC Bank Limited on May 4, 2025 and sell it today you would earn a total of  421.00  from holding HDFC Bank Limited or generate 5.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

HDFC Bank Limited  vs.  Intact Financial

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 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, HDFC Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Intact Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intact Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with HDFC Bank and Intact Financial

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

The idea behind HDFC Bank Limited and Intact Financial 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.