Correlation Between HDFC Bank and BancFirst

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

Diversification Opportunities for HDFC Bank and BancFirst

  Correlation Coefficient

Poor diversification

The 3 months correlation between HDFC Bank and BancFirst is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Bank Limited and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst 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 BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of HDFC Bank i.e., HDFC Bank and BancFirst go up and down completely randomly.

Pair Corralation between HDFC Bank and BancFirst

Considering the 90-day investment horizon HDFC Bank is expected to generate 4.15 times less return on investment than BancFirst. In addition to that, HDFC Bank is 1.16 times more volatile than BancFirst. It trades about 0.02 of its total potential returns per unit of risk. BancFirst is currently generating about 0.1 per unit of volatility. If you would invest  6,578  in BancFirst on September 5, 2022 and sell it today you would earn a total of  3,628  from holding BancFirst or generate 55.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

HDFC Bank Limited  vs.  BancFirst

 Performance (%) 
HDFC Bank Limited 
HDFC Bank Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Bank Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, HDFC Bank may actually be approaching a critical reversion point that can send shares even higher in January 2023.

HDFC Bank Price Channel

BancFirst Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BancFirst is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

BancFirst Price Channel

HDFC Bank and BancFirst Volatility Contrast

   Predicted Return Density   

Pair Trading with HDFC Bank and BancFirst

The main advantage of trading using opposite HDFC Bank and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Bank position performs unexpectedly, BancFirst 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 BancFirst will offset losses from the drop in BancFirst's long position.
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The idea behind HDFC Bank Limited and BancFirst 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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Check out your portfolio center. 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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