Correlation Between St Galler and Basler Kantonalbank

Can any of the company-specific risk be diversified away by investing in both St Galler and Basler Kantonalbank 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 St Galler and Basler Kantonalbank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between St Galler Kantonalbank and Basler Kantonalbank, you can compare the effects of market volatilities on St Galler and Basler Kantonalbank 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 St Galler with a short position of Basler Kantonalbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of St Galler and Basler Kantonalbank.

Diversification Opportunities for St Galler and Basler Kantonalbank

0.95

Correlation Coefficient

St Galler  Basler Kantonalbank

Almost no diversification

The 3 months correlation between SGKN and Basler is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding St Galler Kantonalbank and Basler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basler Kantonalbank and St Galler 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 St Galler Kantonalbank are associated (or correlated) with Basler Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basler Kantonalbank has no effect on the direction of St Galler i.e., St Galler and Basler Kantonalbank go up and down completely randomly.

Pair Corralation between St Galler and Basler Kantonalbank

Assuming the 90 days trading horizon St Galler is expected to generate 1.22 times less return on investment than Basler Kantonalbank. But when comparing it to its historical volatility, St Galler Kantonalbank is 1.4 times less risky than Basler Kantonalbank. It trades about 0.26 of its potential returns per unit of risk. Basler Kantonalbank is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,720  in Basler Kantonalbank on November 28, 2024 and sell it today you would earn a total of  960.00  from holding Basler Kantonalbank or generate 14.29% return on investment over 90 days.

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

St Galler Kantonalbank  vs.  Basler Kantonalbank

St Galler Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Basler Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Basler Kantonalbank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Basler Kantonalbank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St Galler and Basler Kantonalbank

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

The idea behind St Galler Kantonalbank and Basler Kantonalbank 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.