Correlation Between State Bank and NIPPON MEAT

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

Diversification Opportunities for State Bank and NIPPON MEAT

0.64

Correlation Coefficient

State Bank  NIPPON MEAT

Poor diversification

The 3 months correlation between State and NIPPON is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and NIPPON MEAT PACKERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON MEAT PACKERS 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 NIPPON MEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON MEAT PACKERS has no effect on the direction of State Bank i.e., State Bank and NIPPON MEAT go up and down completely randomly.

Pair Corralation between State Bank and NIPPON MEAT

Assuming the 90 days horizon State Bank of is expected to under-perform the NIPPON MEAT. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.38 times less risky than NIPPON MEAT. The stock trades about -0.22 of its potential returns per unit of risk. The NIPPON MEAT PACKERS is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,220  in NIPPON MEAT PACKERS on November 29, 2024 and sell it today you would lose (360.00) from holding NIPPON MEAT PACKERS or give up 11.18% of portfolio value over 90 days.

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

State Bank of  vs.  NIPPON MEAT PACKERS

State Bank

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NIPPON MEAT PACKERS

Risk-Adjusted Performance

Very Weak

Over the last 90 days NIPPON MEAT PACKERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with State Bank and NIPPON MEAT

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

The idea behind State Bank of and NIPPON MEAT PACKERS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.