Correlation Between Silkbank and JS Bank

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

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

Diversification Opportunities for Silkbank and JS Bank

0.23

Correlation Coefficient

Silkbank  JS Bank

Modest diversification

The 3 months correlation between Silkbank and JSBL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and JS Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Bank and Silkbank 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 Silkbank are associated (or correlated) with JS Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Bank has no effect on the direction of Silkbank i.e., Silkbank and JS Bank go up and down completely randomly.

Pair Corralation between Silkbank and JS Bank

Assuming the 90 days trading horizon Silkbank is expected to generate 7.77 times less return on investment than JS Bank. In addition to that, Silkbank is 1.24 times more volatile than JS Bank. It trades about 0.02 of its total potential returns per unit of risk. JS Bank is currently generating about 0.15 per unit of volatility. If you would invest  867.00  in JS Bank on October 26, 2024 and sell it today you would earn a total of  263.00  from holding JS Bank or generate 30.33% return on investment over 90 days.

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

Silkbank  vs.  JS Bank

Silkbank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silkbank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Silkbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JS Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JS Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, JS Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silkbank and JS Bank

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

The idea behind Silkbank and JS Bank 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.