Correlation Between Packages and Silkbank

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

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

Diversification Opportunities for Packages and Silkbank

0.44

Correlation Coefficient

Packages  Silkbank

Very weak diversification

The 3 months correlation between Packages and Silkbank is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Silkbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silkbank and Packages 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 Packages 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 Packages i.e., Packages and Silkbank go up and down completely randomly.

Pair Corralation between Packages and Silkbank

Assuming the 90 days trading horizon Packages is expected to under-perform the Silkbank. But the stock apears to be less risky and, when comparing its historical volatility, Packages is 1.58 times less risky than Silkbank. The stock trades about -0.27 of its potential returns per unit of risk. The Silkbank is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  109.00  in Silkbank on October 10, 2024 and sell it today you would lose (8.00) from holding Silkbank or give up 7.34% of portfolio value over 90 days.

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

Packages  vs.  Silkbank

Packages

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Packages are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Packages sustained solid returns over the last few months and may actually be approaching a breakup point.

Silkbank

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silkbank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Silkbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Packages and Silkbank

The main advantage of trading using opposite Packages and Silkbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages 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 Packages 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.