Correlation Between State Trading and Indian Overseas

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

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

Diversification Opportunities for State Trading and Indian Overseas

0.59

Correlation Coefficient

State Trading  Indian Overseas

Very weak diversification

The 3 months correlation between State and Indian is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and Indian Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Overseas Bank and State Trading 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 The State Trading are associated (or correlated) with Indian Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Overseas Bank has no effect on the direction of State Trading i.e., State Trading and Indian Overseas go up and down completely randomly.

Pair Corralation between State Trading and Indian Overseas

Assuming the 90 days trading horizon The State Trading is expected to generate 1.52 times more return on investment than Indian Overseas. However, State Trading is 1.52 times more volatile than Indian Overseas Bank. It trades about 0.02 of its potential returns per unit of risk. Indian Overseas Bank is currently generating about -0.04 per unit of risk. If you would invest  16,475  in The State Trading on October 10, 2024 and sell it today you would lose (19.00) from holding The State Trading or give up 0.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

The State Trading  vs.  Indian Overseas Bank

State Trading

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Overseas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Indian Overseas is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with State Trading and Indian Overseas

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

The idea behind The State Trading and Indian Overseas 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.