Correlation Between State Bank and Muthoot Finance

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

Diversification Opportunities for State Bank and Muthoot Finance

StateMuthootDiversified AwayStateMuthootDiversified Away100%
-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between State and Muthoot is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Muthoot Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muthoot Finance 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 Muthoot Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muthoot Finance has no effect on the direction of State Bank i.e., State Bank and Muthoot Finance go up and down completely randomly.

Pair Corralation between State Bank and Muthoot Finance

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Muthoot Finance. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.06 times less risky than Muthoot Finance. The stock trades about -0.05 of its potential returns per unit of risk. The Muthoot Finance Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  192,610  in Muthoot Finance Limited on October 27, 2024 and sell it today you would earn a total of  24,730  from holding Muthoot Finance Limited or generate 12.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

State Bank of  vs.  Muthoot Finance Limited

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -5051015
JavaScript chart by amCharts 3.21.15SBIN MUTHOOTFIN
       Timeline  
State Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan720740760780800820840860880
Muthoot Finance 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Muthoot Finance unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1,8001,9002,0002,1002,200

State Bank and Muthoot Finance Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.63-1.97-1.31-0.650.00.631.261.882.51 0.080.100.120.14
JavaScript chart by amCharts 3.21.15SBIN MUTHOOTFIN
       Returns  

Pair Trading with State Bank and Muthoot Finance

The main advantage of trading using opposite State Bank and Muthoot Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, Muthoot Finance 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 Muthoot Finance will offset losses from the drop in Muthoot Finance's long position.
The idea behind State Bank of and Muthoot Finance 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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