Correlation Between HDFC Bank and Voltas

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

Diversification Opportunities for HDFC Bank and Voltas

0.85

Correlation Coefficient

HDFC Bank  Voltas

Very poor diversification

The 3 months correlation between HDFC and Voltas is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and Voltas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voltas Limited 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 Voltas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voltas Limited has no effect on the direction of HDFC Bank i.e., HDFC Bank and Voltas go up and down completely randomly.

Pair Corralation between HDFC Bank and Voltas

Assuming the 90 days trading horizon HDFC Bank is expected to generate 1.68 times less return on investment than Voltas. But when comparing it to its historical volatility, HDFC Bank Limited is 1.43 times less risky than Voltas. It trades about 0.12 of its potential returns per unit of risk. Voltas Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  122,018  in Voltas Limited on April 25, 2025 and sell it today you would earn a total of  14,742  from holding Voltas Limited or generate 12.08% return on investment over 90 days.

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

HDFC Bank Limited  vs.  Voltas Limited

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 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Voltas Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Voltas Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Voltas may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with HDFC Bank and Voltas

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

The idea behind HDFC Bank Limited and Voltas 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.