Correlation Between State Bank and Innova Captab

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

Diversification Opportunities for State Bank and Innova Captab

0.31

Correlation Coefficient

State Bank  Innova Captab

Weak diversification

The 3 months correlation between State and Innova is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Innova Captab Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innova Captab Limited 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 Innova Captab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innova Captab Limited has no effect on the direction of State Bank i.e., State Bank and Innova Captab go up and down completely randomly.

Pair Corralation between State Bank and Innova Captab

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Innova Captab. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 2.93 times less risky than Innova Captab. The stock trades about -0.54 of its potential returns per unit of risk. The Innova Captab Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  108,905  in Innova Captab Limited on October 11, 2024 and sell it today you would earn a total of  9,865  from holding Innova Captab Limited or generate 9.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

State Bank of  vs.  Innova Captab 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Innova Captab Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innova Captab Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Innova Captab exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and Innova Captab

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

The idea behind State Bank of and Innova Captab 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.