Correlation Between State Bank and Arvind

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

Diversification Opportunities for State Bank and Arvind

0.84

Correlation Coefficient

State Bank  Arvind

Very poor diversification

The 3 months correlation between State and Arvind is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Arvind Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arvind Limited 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 Arvind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arvind Limited has no effect on the direction of State Bank i.e., State Bank and Arvind go up and down completely randomly.

Pair Corralation between State Bank and Arvind

Assuming the 90 days trading horizon State Bank of is expected to generate 0.43 times more return on investment than Arvind. However, State Bank of is 2.33 times less risky than Arvind. It trades about -0.09 of its potential returns per unit of risk. Arvind Limited is currently generating about -0.09 per unit of risk. If you would invest  81,205  in State Bank of on December 24, 2024 and sell it today you would lose (5,885) from holding State Bank of or give up 7.25% of portfolio value over 90 days.

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

State Bank of  vs.  Arvind Limited

State Bank

Risk-Adjusted Performance

Very 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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Arvind Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arvind Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with State Bank and Arvind

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

The idea behind State Bank of and Arvind Limited 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.