Correlation Between HDFC Asset and EPL

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

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

Diversification Opportunities for HDFC Asset and EPL

0.8

Correlation Coefficient

HDFC Asset  EPL

Very poor diversification

The 3 months correlation between HDFC and EPL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and EPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPL Limited and HDFC Asset 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 Asset Management are associated (or correlated) with EPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPL Limited has no effect on the direction of HDFC Asset i.e., HDFC Asset and EPL go up and down completely randomly.

Pair Corralation between HDFC Asset and EPL

Assuming the 90 days trading horizon HDFC Asset Management is expected to generate 0.85 times more return on investment than EPL. However, HDFC Asset Management is 1.18 times less risky than EPL. It trades about 0.23 of its potential returns per unit of risk. EPL Limited is currently generating about 0.13 per unit of risk. If you would invest  437,765  in HDFC Asset Management on April 20, 2025 and sell it today you would earn a total of  121,235  from holding HDFC Asset Management or generate 27.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

HDFC Asset Management  vs.  EPL Limited

HDFC Asset Management

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Asset Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, HDFC Asset exhibited solid returns over the last few months and may actually be approaching a breakup point.

EPL Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EPL Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EPL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Asset and EPL

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

The idea behind HDFC Asset Management and EPL 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.