Correlation Between State Bank and Guaranty Trust

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

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

Diversification Opportunities for State Bank and Guaranty Trust

0.57

Correlation Coefficient

State Bank  Guaranty Trust

Very weak diversification

The 3 months correlation between State and Guaranty is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding and State 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 State Bank of are associated (or correlated) with Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of State Bank i.e., State Bank and Guaranty Trust go up and down completely randomly.

Pair Corralation between State Bank and Guaranty Trust

Assuming the 90 days trading horizon State Bank is expected to generate 1.04 times less return on investment than Guaranty Trust. But when comparing it to its historical volatility, State Bank of is 2.74 times less risky than Guaranty Trust. It trades about 0.04 of its potential returns per unit of risk. Guaranty Trust Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  213.00  in Guaranty Trust Holding on September 28, 2024 and sell it today you would lose (28.00) from holding Guaranty Trust Holding or give up 13.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

State Bank of  vs.  Guaranty Trust Holding

State Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Guaranty Trust Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guaranty Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Bank and Guaranty Trust

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

The idea behind State Bank of and Guaranty Trust Holding 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.