Correlation Between Hdfc Bank and Merchants Bancorp

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

Diversification Opportunities for Hdfc Bank and Merchants Bancorp

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hdfc Bank and Merchants is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hdfc Bank Ltd and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Hdfc Bank i.e., Hdfc Bank and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Hdfc Bank and Merchants Bancorp

Considering the 90-day investment horizon Hdfc Bank is expected to generate 1.26 times more return on investment than Merchants Bancorp. However, Hdfc Bank is 1.26 times more volatile than Merchants Bancorp. It trades about -0.09 of its potential returns per unit of risk. Merchants Bancorp is currently generating about -0.31 per unit of risk. If you would invest  5,831  in Hdfc Bank on April 6, 2022 and sell it today you would lose (280.00)  from holding Hdfc Bank or give up 4.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hdfc Bank Ltd  vs.  Merchants Bancorp

 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 latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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

Merchants Bancorp 
Merchants Performance
0 of 100
Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0121
Payout Ratio
0.0467
Last Split Factor
3:2
Forward Annual Dividend Rate
0.28
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-14
Last Split Date
2022-01-18

Merchants Price Channel

Hdfc Bank and Merchants Bancorp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Hdfc Bank and Merchants Bancorp

The main advantage of trading using opposite Hdfc Bank and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hdfc Bank position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.
The idea behind Hdfc Bank and Merchants Bancorp 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.
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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