Correlation Between Hdfc Bank and China Merchants

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Can any of the company-specific risk be diversified away by investing in both Hdfc Bank and China Merchants 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 China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hdfc Bank and China Merchants Bank, you can compare the effects of market volatilities on Hdfc Bank and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hdfc Bank and China Merchants.

Diversification Opportunities for Hdfc Bank and China Merchants

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Hdfc Bank and China is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hdfc Bank Ltd and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Hdfc Bank i.e., Hdfc Bank and China Merchants go up and down completely randomly.

Pair Corralation between Hdfc Bank and China Merchants

Considering the 90-day investment horizon Hdfc Bank is expected to under-perform the China Merchants. In addition to that, Hdfc Bank is 1.36 times more volatile than China Merchants Bank. It trades about -0.09 of its total potential returns per unit of risk. China Merchants Bank is currently generating about 0.19 per unit of volatility. If you would invest  3,110  in China Merchants Bank on April 5, 2022 and sell it today you would earn a total of  210.00  from holding China Merchants Bank or generate 6.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Hdfc Bank Ltd  vs.  China Merchants Bank

 Performance (%) 
      Timeline 
Hdfc Bank 
Hdfc Bank Performance
0 of 100
Over the last 90 days Hdfc Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0111
Payout Ratio
0.45
Last Split Factor
2:1
Forward Annual Dividend Rate
0.61
Dividend Date
2021-08-19
Ex Dividend Date
2022-05-11
Last Split Date
2019-09-26

Hdfc Bank Price Channel

China Merchants Bank 
China Performance
0 of 100
Over the last 90 days China Merchants Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0344
Payout Ratio
0.36
Forward Annual Dividend Rate
1.14
Dividend Date
2022-08-25
Ex Dividend Date
2022-07-06

China Price Channel

Hdfc Bank and China Merchants Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Hdfc Bank and China Merchants

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

China Merchants Bank

Pair trading matchups for China Merchants

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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