Correlation Between Crescent Star and Silkbank

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

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

Diversification Opportunities for Crescent Star and Silkbank

0.3

Correlation Coefficient

Crescent Star  Silkbank

Weak diversification

The 3 months correlation between Crescent and Silkbank is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and Silkbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silkbank and Crescent Star 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 Crescent Star Insurance are associated (or correlated) with Silkbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silkbank has no effect on the direction of Crescent Star i.e., Crescent Star and Silkbank go up and down completely randomly.

Pair Corralation between Crescent Star and Silkbank

Assuming the 90 days trading horizon Crescent Star Insurance is expected to generate 0.86 times more return on investment than Silkbank. However, Crescent Star Insurance is 1.17 times less risky than Silkbank. It trades about 0.03 of its potential returns per unit of risk. Silkbank is currently generating about -0.08 per unit of risk. If you would invest  285.00  in Crescent Star Insurance on October 27, 2024 and sell it today you would earn a total of  3.00  from holding Crescent Star Insurance or generate 1.05% return on investment over 90 days.

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

Crescent Star Insurance  vs.  Silkbank

Crescent Star Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Star Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Star may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Silkbank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silkbank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Silkbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Crescent Star and Silkbank

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

The idea behind Crescent Star Insurance and Silkbank 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 the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..