Correlation Between HDFC Life and General Insurance

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

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

Diversification Opportunities for HDFC Life and General Insurance

-0.62

Correlation Coefficient

HDFC Life  General Insurance

Excellent diversification

The 3 months correlation between HDFC and General is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and HDFC Life 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 Life Insurance are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of HDFC Life i.e., HDFC Life and General Insurance go up and down completely randomly.

Pair Corralation between HDFC Life and General Insurance

Assuming the 90 days trading horizon HDFC Life Insurance is expected to generate 0.78 times more return on investment than General Insurance. However, HDFC Life Insurance is 1.29 times less risky than General Insurance. It trades about 0.05 of its potential returns per unit of risk. General Insurance is currently generating about -0.1 per unit of risk. If you would invest  71,068  in HDFC Life Insurance on April 22, 2025 and sell it today you would earn a total of  2,882  from holding HDFC Life Insurance or generate 4.06% return on investment over 90 days.

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

HDFC Life Insurance  vs.  General Insurance

HDFC Life Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Life Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, HDFC Life is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

General Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with HDFC Life and General Insurance

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

The idea behind HDFC Life Insurance and General Insurance 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.