Correlation Between State Bank and London Security
Can any of the company-specific risk be diversified away by investing in both State Bank and London Security 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 London Security 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 London Security Plc, you can compare the effects of market volatilities on State Bank and London Security 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 London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and London Security.
Diversification Opportunities for State Bank and London Security
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and London is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of State Bank i.e., State Bank and London Security go up and down completely randomly.
Pair Corralation between State Bank and London Security
Assuming the 90 days trading horizon State Bank of is expected to under-perform the London Security. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.11 times less risky than London Security. The stock trades about -0.02 of its potential returns per unit of risk. The London Security Plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 340,000 in London Security Plc on December 30, 2024 and sell it today you would earn a total of 25,000 from holding London Security Plc or generate 7.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
State Bank of vs. London Security Plc
Performance |
Timeline |
State Bank |
London Security Plc |
State Bank and London Security Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with State Bank and London Security
The main advantage of trading using opposite State Bank and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.State Bank vs. Dairy Farm International | State Bank vs. Silvercorp Metals | State Bank vs. Wyndham Hotels Resorts | State Bank vs. Jacquet Metal Service |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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