Correlation Between State Bank and Hindalco Industries

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

Diversification Opportunities for State Bank and Hindalco Industries

-0.21

Correlation Coefficient

State Bank  Hindalco Industries

Very good diversification

The 3 months correlation between State and Hindalco is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Hindalco Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindalco Industries 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 Hindalco Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindalco Industries has no effect on the direction of State Bank i.e., State Bank and Hindalco Industries go up and down completely randomly.

Pair Corralation between State Bank and Hindalco Industries

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Hindalco Industries. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.27 times less risky than Hindalco Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Hindalco Industries Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  60,110  in Hindalco Industries Limited on December 30, 2024 and sell it today you would earn a total of  8,135  from holding Hindalco Industries Limited or generate 13.53% return on investment over 90 days.

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

State Bank of  vs.  Hindalco Industries 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 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.

Hindalco Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hindalco Industries Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Hindalco Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and Hindalco Industries

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

The idea behind State Bank of and Hindalco Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..