Correlation Between HDFC Bank and Infinity Bank

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

Diversification Opportunities for HDFC Bank and Infinity Bank

0.64

Correlation Coefficient

HDFC Bank  Infinity Bank

Poor diversification

The 3 months correlation between HDFC and Infinity is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Infinity Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinity Bank 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 Infinity Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinity Bank has no effect on the direction of HDFC Bank i.e., HDFC Bank and Infinity Bank go up and down completely randomly.

Pair Corralation between HDFC Bank and Infinity Bank

Considering the 90-day investment horizon HDFC Bank is expected to generate 5.52 times less return on investment than Infinity Bank. But when comparing it to its historical volatility, HDFC Bank Limited is 2.21 times less risky than Infinity Bank. It trades about 0.08 of its potential returns per unit of risk. Infinity Bank is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,020  in Infinity Bank on May 6, 2025 and sell it today you would earn a total of  430.00  from holding Infinity Bank or generate 42.16% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Infinity Bank

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.

Infinity Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Infinity Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Infinity Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Infinity Bank

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

The idea behind HDFC Bank Limited and Infinity Bank 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.