Correlation Between Alkali Metals and HDFC Bank

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

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

Diversification Opportunities for Alkali Metals and HDFC Bank

0.24

Correlation Coefficient

Alkali Metals  HDFC Bank

Modest diversification

The 3 months correlation between Alkali and HDFC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited 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 Alkali Metals 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 Alkali Metals Limited 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 Alkali Metals i.e., Alkali Metals and HDFC Bank go up and down completely randomly.

Pair Corralation between Alkali Metals and HDFC Bank

Assuming the 90 days trading horizon Alkali Metals Limited is expected to generate 3.36 times more return on investment than HDFC Bank. However, Alkali Metals is 3.36 times more volatile than HDFC Bank Limited. It trades about 0.08 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.1 per unit of risk. If you would invest  8,622  in Alkali Metals Limited on April 17, 2025 and sell it today you would earn a total of  1,234  from holding Alkali Metals Limited or generate 14.31% return on investment over 90 days.

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

Alkali Metals Limited  vs.  HDFC Bank Limited

Alkali Metals Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alkali Metals Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alkali Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

HDFC Bank Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HDFC Bank is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alkali Metals and HDFC Bank

The main advantage of trading using opposite Alkali Metals and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkali Metals 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 Alkali Metals Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.