Correlation Between State Bank and Viceroy Hotels

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

Diversification Opportunities for State Bank and Viceroy Hotels

-0.06

Correlation Coefficient

State Bank  Viceroy Hotels

Good diversification

The 3 months correlation between State and Viceroy is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Viceroy Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viceroy Hotels 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 Viceroy Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viceroy Hotels has no effect on the direction of State Bank i.e., State Bank and Viceroy Hotels go up and down completely randomly.

Pair Corralation between State Bank and Viceroy Hotels

Assuming the 90 days trading horizon State Bank of is expected to generate 0.52 times more return on investment than Viceroy Hotels. However, State Bank of is 1.93 times less risky than Viceroy Hotels. It trades about 0.05 of its potential returns per unit of risk. Viceroy Hotels Limited is currently generating about 0.0 per unit of risk. If you would invest  77,065  in State Bank of on October 5, 2024 and sell it today you would earn a total of  3,055  from holding State Bank of or generate 3.96% 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.  Viceroy Hotels Limited

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.

Viceroy Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viceroy Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Viceroy Hotels is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with State Bank and Viceroy Hotels

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

The idea behind State Bank of and Viceroy Hotels 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.