Correlation Between State Bank and Bridgestone

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

Diversification Opportunities for State Bank and Bridgestone

-0.19

Correlation Coefficient

State Bank  Bridgestone

Good diversification

The 3 months correlation between State and Bridgestone is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of State Bank i.e., State Bank and Bridgestone go up and down completely randomly.

Pair Corralation between State Bank and Bridgestone

Assuming the 90 days horizon State Bank of is expected to generate 1.39 times more return on investment than Bridgestone. However, State Bank is 1.39 times more volatile than Bridgestone. It trades about -0.02 of its potential returns per unit of risk. Bridgestone is currently generating about -0.07 per unit of risk. If you would invest  8,800  in State Bank of on October 20, 2024 and sell it today you would lose (300.00) from holding State Bank of or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

State Bank of  vs.  Bridgestone

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. Despite nearly stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bridgestone is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with State Bank and Bridgestone

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

The idea behind State Bank of and Bridgestone 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.