Correlation Between CSB Bank and Foods Inns

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

By analyzing existing cross correlation between CSB Bank Limited and Foods Inns Limited, you can compare the effects of market volatilities on CSB Bank and Foods Inns 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 CSB Bank with a short position of Foods Inns. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSB Bank and Foods Inns.

Diversification Opportunities for CSB Bank and Foods Inns

0.1

Correlation Coefficient

CSB Bank  Foods Inns

Average diversification

The 3 months correlation between CSB and Foods is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CSB Bank Limited and Foods Inns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foods Inns Limited and CSB 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 CSB Bank Limited are associated (or correlated) with Foods Inns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foods Inns Limited has no effect on the direction of CSB Bank i.e., CSB Bank and Foods Inns go up and down completely randomly.

Pair Corralation between CSB Bank and Foods Inns

Assuming the 90 days trading horizon CSB Bank Limited is expected to generate 0.5 times more return on investment than Foods Inns. However, CSB Bank Limited is 2.01 times less risky than Foods Inns. It trades about 0.04 of its potential returns per unit of risk. Foods Inns Limited is currently generating about -0.02 per unit of risk. If you would invest  30,845  in CSB Bank Limited on October 6, 2024 and sell it today you would earn a total of  1,065  from holding CSB Bank Limited or generate 3.45% return on investment over 90 days.

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

CSB Bank Limited  vs.  Foods Inns Limited

CSB Bank Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSB Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CSB Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Foods Inns Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foods Inns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Foods Inns is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CSB Bank and Foods Inns

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

The idea behind CSB Bank Limited and Foods Inns Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.