Correlation Between State Bank and HCL Technologies

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

Diversification Opportunities for State Bank and HCL Technologies

0.51

Correlation Coefficient

State Bank  HCL Technologies

Very weak diversification

The 3 months correlation between State and HCL is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies 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 HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of State Bank i.e., State Bank and HCL Technologies go up and down completely randomly.

Pair Corralation between State Bank and HCL Technologies

Assuming the 90 days trading horizon State Bank of is expected to under-perform the HCL Technologies. In addition to that, State Bank is 1.3 times more volatile than HCL Technologies Limited. It trades about -0.02 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.08 per unit of volatility. If you would invest  177,880  in HCL Technologies Limited on October 3, 2024 and sell it today you would earn a total of  13,860  from holding HCL Technologies Limited or generate 7.79% return on investment over 90 days.

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

State Bank of  vs.  HCL Technologies 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 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.

HCL Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical and fundamental indicators, HCL Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with State Bank and HCL Technologies

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

The idea behind State Bank of and HCL Technologies 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.