Correlation Between State Bank and Energy Development

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

Diversification Opportunities for State Bank and Energy Development

0.89

Correlation Coefficient

State Bank  Energy Development

Very poor diversification

The 3 months correlation between State and Energy is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Energy Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Development 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 Energy Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Development has no effect on the direction of State Bank i.e., State Bank and Energy Development go up and down completely randomly.

Pair Corralation between State Bank and Energy Development

Assuming the 90 days trading horizon State Bank of is expected to generate 0.46 times more return on investment than Energy Development. However, State Bank of is 2.16 times less risky than Energy Development. It trades about -0.04 of its potential returns per unit of risk. Energy Development is currently generating about -0.23 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 (3,125) from holding State Bank of or give up 3.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

State Bank of  vs.  Energy Development

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 comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Energy Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with State Bank and Energy Development

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

The idea behind State Bank of and Energy Development 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.