Correlation Between State Bank and Hi Tech

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

Diversification Opportunities for State Bank and Hi Tech

0.4

Correlation Coefficient

State Bank  Hi Tech

Very weak diversification

The 3 months correlation between State and HITECHGEAR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and The Hi Tech Gears in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech 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 Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech has no effect on the direction of State Bank i.e., State Bank and Hi Tech go up and down completely randomly.

Pair Corralation between State Bank and Hi Tech

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Hi Tech. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.69 times less risky than Hi Tech. The stock trades about -0.33 of its potential returns per unit of risk. The The Hi Tech Gears is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  87,180  in The Hi Tech Gears on October 5, 2024 and sell it today you would lose (5,135) from holding The Hi Tech Gears or give up 5.89% of portfolio value over 90 days.

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

State Bank of  vs.  The Hi Tech Gears

State Bank

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hi Tech Gears has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Hi Tech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with State Bank and Hi Tech

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

The idea behind State Bank of and The Hi Tech Gears 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.