Correlation Between HDFC Asset and Tata Investment

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

Diversification Opportunities for HDFC Asset and Tata Investment

0.81

Correlation Coefficient

HDFC Asset  Tata Investment

Very poor diversification

The 3 months correlation between HDFC and Tata is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Asset Management and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment 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 Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of HDFC Asset i.e., HDFC Asset and Tata Investment go up and down completely randomly.

Pair Corralation between HDFC Asset and Tata Investment

Assuming the 90 days trading horizon HDFC Asset Management is expected to generate 1.04 times more return on investment than Tata Investment. However, HDFC Asset is 1.04 times more volatile than Tata Investment. It trades about 0.21 of its potential returns per unit of risk. Tata Investment is currently generating about 0.08 per unit of risk. If you would invest  447,551  in HDFC Asset Management on April 23, 2025 and sell it today you would earn a total of  114,649  from holding HDFC Asset Management or generate 25.62% return on investment over 90 days.

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

HDFC Asset Management  vs.  Tata Investment

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 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HDFC Asset exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tata Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Tata Investment may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with HDFC Asset and Tata Investment

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

The idea behind HDFC Asset Management and Tata Investment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.