Correlation Between CM Hospitalar and HDFC Bank

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

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

Diversification Opportunities for CM Hospitalar and HDFC Bank

0.08

Correlation Coefficient

CM Hospitalar  HDFC Bank

Significant diversification

The 3 months correlation between VVEO3 and HDFC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CM Hospitalar SA and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited and CM Hospitalar 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 CM Hospitalar SA are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of CM Hospitalar i.e., CM Hospitalar and HDFC Bank go up and down completely randomly.

Pair Corralation between CM Hospitalar and HDFC Bank

Assuming the 90 days trading horizon CM Hospitalar SA is expected to under-perform the HDFC Bank. In addition to that, CM Hospitalar is 3.99 times more volatile than HDFC Bank Limited. It trades about -0.02 of its total potential returns per unit of risk. HDFC Bank Limited is currently generating about 0.0 per unit of volatility. If you would invest  8,240  in HDFC Bank Limited on April 23, 2025 and sell it today you would lose (39.00) from holding HDFC Bank Limited or give up 0.47% of portfolio value over 90 days.

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

CM Hospitalar SA  vs.  HDFC Bank Limited

CM Hospitalar SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CM Hospitalar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

HDFC Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDFC Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, HDFC Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CM Hospitalar and HDFC Bank

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

The idea behind CM Hospitalar SA and HDFC Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.