Correlation Between State Bank and Globe Trade

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

Diversification Opportunities for State Bank and Globe Trade

-0.56

Correlation Coefficient

State Bank  Globe Trade

Excellent diversification

The 3 months correlation between State and Globe is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Globe Trade Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Trade Centre 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 Globe Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Trade Centre has no effect on the direction of State Bank i.e., State Bank and Globe Trade go up and down completely randomly.

Pair Corralation between State Bank and Globe Trade

Assuming the 90 days horizon State Bank of is expected to generate 4.54 times more return on investment than Globe Trade. However, State Bank is 4.54 times more volatile than Globe Trade Centre. It trades about 0.11 of its potential returns per unit of risk. Globe Trade Centre is currently generating about -0.11 per unit of risk. If you would invest  8,400  in State Bank of on September 13, 2024 and sell it today you would earn a total of  1,100  from holding State Bank of or generate 13.1% return on investment over 90 days.

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

State Bank of  vs.  Globe Trade Centre

State Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Globe Trade Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Globe Trade is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with State Bank and Globe Trade

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

The idea behind State Bank of and Globe Trade Centre 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.