Correlation Between HDFC Bank and Brookfield

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

Diversification Opportunities for HDFC Bank and Brookfield

-0.09

Correlation Coefficient

HDFC Bank  Brookfield

Good diversification

The 3 months correlation between HDFC and Brookfield is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of HDFC Bank i.e., HDFC Bank and Brookfield go up and down completely randomly.

Pair Corralation between HDFC Bank and Brookfield

Assuming the 90 days trading horizon HDFC Bank Limited is expected to under-perform the Brookfield. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Bank Limited is 2.12 times less risky than Brookfield. The stock trades about -0.02 of its potential returns per unit of risk. The Brookfield is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,448  in Brookfield on April 24, 2025 and sell it today you would earn a total of  1,798  from holding Brookfield or generate 24.14% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Brookfield

HDFC Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, HDFC Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brookfield

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Bank and Brookfield

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

The idea behind HDFC Bank Limited and Brookfield 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.