Correlation Between Postal Savings and National Silicon

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

By analyzing existing cross correlation between Postal Savings Bank and National Silicon Industry, you can compare the effects of market volatilities on Postal Savings and National Silicon 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 Postal Savings with a short position of National Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postal Savings and National Silicon.

Diversification Opportunities for Postal Savings and National Silicon

0.22

Correlation Coefficient

Postal Savings  National Silicon

Modest diversification

The 3 months correlation between Postal and National is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Postal Savings Bank and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry and Postal Savings 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 Postal Savings Bank are associated (or correlated) with National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of Postal Savings i.e., Postal Savings and National Silicon go up and down completely randomly.

Pair Corralation between Postal Savings and National Silicon

Assuming the 90 days trading horizon Postal Savings Bank is expected to generate 0.5 times more return on investment than National Silicon. However, Postal Savings Bank is 2.01 times less risky than National Silicon. It trades about 0.01 of its potential returns per unit of risk. National Silicon Industry is currently generating about -0.02 per unit of risk. If you would invest  530.00  in Postal Savings Bank on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Postal Savings Bank or generate 0.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Postal Savings Bank  vs.  National Silicon Industry

Postal Savings Bank

Risk-Adjusted Performance

Very Weak

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

National Silicon Industry

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Postal Savings and National Silicon

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

The idea behind Postal Savings Bank and National Silicon Industry 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.