Correlation Between State Bank and Livermore Investments

Can any of the company-specific risk be diversified away by investing in both State Bank and Livermore Investments 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 Livermore Investments 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 Livermore Investments Group, you can compare the effects of market volatilities on State Bank and Livermore Investments 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 Livermore Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Livermore Investments.

Diversification Opportunities for State Bank and Livermore Investments

0.43

Correlation Coefficient

State Bank  Livermore Investments

Very weak diversification

The 3 months correlation between State and Livermore is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Livermore Investments Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livermore Investments 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 Livermore Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livermore Investments has no effect on the direction of State Bank i.e., State Bank and Livermore Investments go up and down completely randomly.

Pair Corralation between State Bank and Livermore Investments

Assuming the 90 days trading horizon State Bank is expected to generate 35.02 times less return on investment than Livermore Investments. But when comparing it to its historical volatility, State Bank of is 1.6 times less risky than Livermore Investments. It trades about 0.01 of its potential returns per unit of risk. Livermore Investments Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,735  in Livermore Investments Group on September 28, 2024 and sell it today you would earn a total of  1,665  from holding Livermore Investments Group or generate 44.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

State Bank of  vs.  Livermore Investments Group

State Bank

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Livermore Investments

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and Livermore Investments

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

The idea behind State Bank of and Livermore Investments Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.