Correlation Between Global Standard and Settlebank

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

By analyzing existing cross correlation between Global Standard Technology and Settlebank, you can compare the effects of market volatilities on Global Standard and Settlebank 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 Global Standard with a short position of Settlebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Standard and Settlebank.

Diversification Opportunities for Global Standard and Settlebank

0.36

Correlation Coefficient

Global Standard  Settlebank

Weak diversification

The 3 months correlation between Global and Settlebank is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Global Standard Technology and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank and Global Standard 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 Global Standard Technology are associated (or correlated) with Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of Global Standard i.e., Global Standard and Settlebank go up and down completely randomly.

Pair Corralation between Global Standard and Settlebank

Assuming the 90 days trading horizon Global Standard Technology is expected to generate 1.32 times more return on investment than Settlebank. However, Global Standard is 1.32 times more volatile than Settlebank. It trades about -0.01 of its potential returns per unit of risk. Settlebank is currently generating about -0.13 per unit of risk. If you would invest  1,504,000  in Global Standard Technology on September 4, 2024 and sell it today you would lose (76,000) from holding Global Standard Technology or give up 5.05% of portfolio value over 90 days.

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

Global Standard Technology  vs.  Settlebank

Global Standard Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Global Standard and Settlebank

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

The idea behind Global Standard Technology and Settlebank 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.