Correlation Between State Bank and Gallantt Ispat

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

Diversification Opportunities for State Bank and Gallantt Ispat

0.27

Correlation Coefficient

State Bank  Gallantt Ispat

Modest diversification

The 3 months correlation between State and Gallantt is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Gallantt Ispat Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gallantt Ispat 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 Gallantt Ispat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gallantt Ispat has no effect on the direction of State Bank i.e., State Bank and Gallantt Ispat go up and down completely randomly.

Pair Corralation between State Bank and Gallantt Ispat

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Gallantt Ispat. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 2.27 times less risky than Gallantt Ispat. The stock trades about -0.79 of its potential returns per unit of risk. The Gallantt Ispat Limited is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  34,710  in Gallantt Ispat Limited on October 16, 2024 and sell it today you would lose (3,160) from holding Gallantt Ispat Limited or give up 9.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

State Bank of  vs.  Gallantt Ispat Limited

State Bank

Risk-Adjusted Performance

0 of 100

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 unsteady 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.

Gallantt Ispat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gallantt Ispat Limited 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.

Pair Trading with State Bank and Gallantt Ispat

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

The idea behind State Bank of and Gallantt Ispat 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.