Correlation Between State Bank and Keynote Financial

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

Diversification Opportunities for State Bank and Keynote Financial

0.44

Correlation Coefficient

State Bank  Keynote Financial

Very weak diversification

The 3 months correlation between State and Keynote is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Keynote Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keynote Financial 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 Keynote Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keynote Financial has no effect on the direction of State Bank i.e., State Bank and Keynote Financial go up and down completely randomly.

Pair Corralation between State Bank and Keynote Financial

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Keynote Financial. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 2.74 times less risky than Keynote Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Keynote Financial Services is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  26,030  in Keynote Financial Services on October 24, 2024 and sell it today you would lose (2,695) from holding Keynote Financial Services or give up 10.35% 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.  Keynote Financial Services

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Keynote Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keynote Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with State Bank and Keynote Financial

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

The idea behind State Bank of and Keynote Financial Services 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.