Preview

Pair Trading Strategy: Short SBIN, Long HDFCBANK

Satisfactory Essays
Open Document
Open Document
993 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Pair Trading Strategy: Short SBIN, Long HDFCBANK
India Alternative Research

Pair Trading Strategy : Short SBIN, Long HDFCBANK
Recommended Strategy Short SBIN, Long HDFCBANK on a rupee-neutral basis. Currently, the November Futures of SBIN and HDFCBANK are trading at Rs 1,121.25 and Rs 821.90 respectively, giving a current price ratio (SBIN/HDFCBANK) of 1.380 . We recommend profit booking at the price ratio of 1.216 , keeping a stop loss of 1.502 . The expected return at the target is 11.8%, computed on gross exposure. Over the past 1 month, SBIN has outperformed HDFCBANK as SBIN has decreased by 20.0% as against a decrease of 22.9% in HDFCBANK. As a result, the current price ratio of 1.380 is trading at 2.79 x standard deviations above 20 day mean price ratio. HDFCBANK Price Ratio (SBIN / HDFCBANK)
1.52 1.40 1.28 1.16 1.04 Feb-08 Jan-08 Apr-08 Jul-08 Aug-08 Sep-08 Dec-07 Mar-08 Oct-08 Nov-07 May-08 Nov-08 Jun-08

November 21, 2008 10:26 AM IST

SBIN Bloomberg NSE Price Mkt. Cap (Rs Cr) Beta Lot Size Lot Value (Rs) SBIN=1 SBIN 1,121.25 70,678 1.05 132 148,223

Bloomberg NSE Price Mkt. Cap (Rs Cr) Beta Lot Size Lot Value (Rs)

HDFCB=1 HDFCBANK 821.90 34,439 1.05 200 167,160

Source : Bloomberg, KRC Research

CA Alok Agarwal alok.agarwal@krchoksey.com ℡ 91-22-6696 5555 (Ext.502)

Key Statistics Stock Ratio data Current Ratio Expected Ratio % return 1.380 1.216 11.8% Average Ratio 20 days 60 days 250 days 1.193 1.210 1.252 Correlation 20 days 60 days 250 days 84% 85% 93%

www.krchoksey.com

KRC Research is also available on Bloomberg KRCS, Thomson First Call, Reuters and Factset

India Alternative Research

Past Performance Closed Trades :
No. of Days Trade Open Start Date / Close Date Entry Strategy Price (Rs.) 504.90 282.90 1,016.15 1,507.55 1,387.55 161.10 283.20 72.80 301.30 69.60 758.10 322.40 429.60 126.10 589.00 80.15 Entry Ratio Close Price (Rs.) 549.00 278.40 817.30 1,110.00 1,268.00 163.50 278.25 76.50 306.70 66.85 758.50 338.00 383.35 119.25 608.55 85.95 Close Ratio Ret. On GE

You May Also Find These Documents Helpful

  • Powerful Essays

    ROE | 23.17% | 22.07% | Margin ratio | 43.52% | 44.73% | Turnover | 189 times | 190 times | PPE | 3.17 | 2.71 | Days sales in accounts receivable | 323.13 days | 324.48 days |…

    • 1971 Words
    • 8 Pages
    Powerful Essays
  • Good Essays

    Hershey vs Tootsie Roll

    • 1321 Words
    • 5 Pages

    2004 – 1.06, 2005 – 1.28, 2006 – 1.08, 2007 - .86, 2008 - .66…

    • 1321 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Creative Computers and Ubid that you would suggest? Be specific about size of the positions…

    • 157 Words
    • 1 Page
    Satisfactory Essays
  • Powerful Essays

    Chipotle Mexican Grill

    • 3043 Words
    • 13 Pages

    N.I growth | ----------- | 62.20 | 41.10 | 20.09 | 29.33 | (5) ROS, ROA & ROE Expressed as percentages. | 2008 | 2009 | 2010 | 2011 | 2012 | ROS | 5.87 | 8.35 | 9.74 | 9.47 | 10.17 | TA | 824,985,000 | 961,505,000 | 1,121,605,000 | 1,425,308,000 | 1,668,667,000 | ROA | 9.47 | 13.19 | 15.95 | 15.08 | 16.66 | TSE | 622,590,000 | 703,461,000 | 810,873,000 | 1,044,226,000 | 1,245,926,000 |…

    • 3043 Words
    • 13 Pages
    Powerful Essays
  • Powerful Essays

    Verizon vs Att

    • 1488 Words
    • 6 Pages

    This section will discuss ratio analysis for the following ratios: current ratio, quick (acid-test) ratio, average collection period, debt to assets ratio, debt to equity ratio, interest coverage ratio, net profit margin, and price to earnings ratio. Depending on the end user which ratio carries more importance, however, all must be familiar with ratio analysis. Details on each company's performance for each of these areas can be found in the attached ratio analysis worksheet.…

    • 1488 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    2ap3 Midterm

    • 1071 Words
    • 5 Pages

    Jan. 7 Jan. 14 Jan.. 14 Jan. 21 Jan. 28 Jan. 28 Feb. 4 * Feb. 11 Feb. 18 Feb. 25 Mar. 4 Mar. 11 * Mar. 18 Mar. 25 Mar. 25 Apr. 1 Apr. 8…

    • 1071 Words
    • 5 Pages
    Powerful Essays
  • Good Essays

    Highest Paid Wpmen

    • 509 Words
    • 3 Pages

    8.9 8.9 9.1 9.4 9.6 10.0 10.1 10.1 10.5 11.0 11.1 11.5 11.6 11.8 11.9 12.4 12.8 14.7 14.8 14.9 15.7 16.3 16.4 34.1 38.6…

    • 509 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Understanding the key ratios of a company is very important for investors. Each ratio uncovers the inner workings of the company, and may lead an investor to make a decision on whether to invest in the company, or to continue looking elsewhere. Exxon Mobil and Chevron are both in the same industry, and are virtually household names. In this study, key ratios of these two companies…

    • 2070 Words
    • 9 Pages
    Powerful Essays
  • Powerful Essays

    Garmin

    • 7016 Words
    • 29 Pages

    Ratios ROE - 5Yr. Avg. ROA - 5Yr. Avg. Sales - 5Yr. Growth Rate Gross Margin - 5Yr. Avg. Net Profit Margin - 5Yr. Avg. P/E Ratio EPS - 5Yr. Growth Rate Dividend Yield - 5Yr. Avg. Garmin 30.38% 25.71% 35.04% 52.46% 29.39 23.06 35.04% 0.01% Industry 6.00% 2.99% 19.82% 45.71% 4.59 25.25 37.33% 0.41% S&P 500 18.21% 6.84% 13.29% 44.32% 12.31 20.65 22.21% 1.85%…

    • 7016 Words
    • 29 Pages
    Powerful Essays
  • Powerful Essays

    Ibm Stock Analysis

    • 4755 Words
    • 20 Pages

    SUMMARY DATA 52-Week High 52-Week Low One-Year Return (%) Beta Average Daily Volume (sh) Shares Outstanding (mil) Market Capitalization ($mil) Short Interest Ratio (days) Institutional Ownership (%) Insider Ownership (%) Annual Cash Dividend Dividend Yield (%) 5-Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2013 Estimate P/E using 2014 Estimate Zacks Rank *: Short Term 1 3 months outlook…

    • 4755 Words
    • 20 Pages
    Powerful Essays
  • Satisfactory Essays

    Analysis Of Gamuda Land

    • 1049 Words
    • 5 Pages

    Before we start to invest in a company, we need to analyze the financial ratio for each company. This is because it helps us to know whether the companies status are worth to invest or not. Without analyzing the financial ratios of companies, it would be risky to invest and causing making loss on investment.…

    • 1049 Words
    • 5 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Pinkerton Case Solution

    • 636 Words
    • 3 Pages

    1987 408.3 381.7 26.6 27 -0.4 1988 363.387 332.4991 30.8879 21.80322 9.084675 1989 323.4144 294.3071 29.1073 19.08145 10.02585 1990 287.8388 260.4942 27.34469 16.69465 10.65004 1991 302.2308 271.2521 30.97866 17.52939 13.44927 1992 317.3423 284.8147 32.52759 18.40585 14.12173…

    • 636 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    return

    • 1421 Words
    • 75 Pages

    0.14647 -0.09368 0.00386 22 30JUN1995 0.09762 -0.09990 0.14647 -0.09368 23 29SEP1995 -0.00228…

    • 1421 Words
    • 75 Pages
    Satisfactory Essays
  • Good Essays

    Utv Invevestment Case

    • 446 Words
    • 2 Pages

    * The maximum price the stock can reach is Rs. 1100 and hence offers the potential of 2% from the current price of Rs. 108. Hence, I would not to invest in the stock.…

    • 446 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Yield Management

    • 900 Words
    • 4 Pages

    RATIOS OCC % ADR REVPAR TREVPAR GOPPAR ROE Forecast Q2 Y1 68.63% 121 66 210 NA NA Actual Q2 Y1 71.27% 146 104 160 52 NA Forecast Q2 Y2 81.36% 221 159 260 NA NA Actual Q2 Y2 76.69% 238 148 206 87 NA Var. % Y2 -4.67% +7.69% -6.92% -26.21% NA NA Actual YTD Y2 76.69% 238 148 206 82…

    • 900 Words
    • 4 Pages
    Satisfactory Essays