Correlation Between Intact Financial and HDFC Bank

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

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

Diversification Opportunities for Intact Financial and HDFC Bank

0.09

Correlation Coefficient

Intact Financial  HDFC Bank

Significant diversification

The 3 months correlation between Intact and HDFC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial 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 Intact Financial 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 Intact Financial 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 Intact Financial i.e., Intact Financial and HDFC Bank go up and down completely randomly.

Pair Corralation between Intact Financial and HDFC Bank

Assuming the 90 days trading horizon Intact Financial is expected to under-perform the HDFC Bank. In addition to that, Intact Financial is 1.13 times more volatile than HDFC Bank Limited. It trades about -0.1 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.06 per unit of volatility. If you would invest  7,222  in HDFC Bank Limited on May 19, 2025 and sell it today you would earn a total of  278.00  from holding HDFC Bank Limited or generate 3.85% return on investment over 90 days.

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

Intact Financial  vs.  HDFC Bank Limited

Intact Financial

Risk-Adjusted Performance

Weakest

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.

HDFC Bank Limited

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 4 (%) 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.

Pair Trading with Intact Financial and HDFC Bank

The main advantage of trading using opposite Intact Financial and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intact Financial 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 Intact Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.