Correlation Between HDFC Life and Home First

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

Diversification Opportunities for HDFC Life and Home First

0.51

Correlation Coefficient

HDFC Life  Home First

Very weak diversification

The 3 months correlation between HDFC and Home is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance 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 Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of HDFC Life i.e., HDFC Life and Home First go up and down completely randomly.

Pair Corralation between HDFC Life and Home First

Assuming the 90 days trading horizon HDFC Life is expected to generate 1.43 times less return on investment than Home First. But when comparing it to its historical volatility, HDFC Life Insurance is 1.73 times less risky than Home First. It trades about 0.1 of its potential returns per unit of risk. Home First Finance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  125,831  in Home First Finance on April 24, 2025 and sell it today you would earn a total of  13,509  from holding Home First Finance or generate 10.74% return on investment over 90 days.

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

HDFC Life Insurance  vs.  Home First Finance

HDFC Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Life Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, HDFC Life may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Home First Finance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home First Finance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Home First may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with HDFC Life and Home First

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

The idea behind HDFC Life Insurance and Home First Finance 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.