Correlation Between DCB Bank and Federal Bank
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By analyzing existing cross correlation between DCB Bank Limited and The Federal Bank, you can compare the effects of market volatilities on DCB Bank and Federal 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 DCB Bank with a short position of Federal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCB Bank and Federal Bank.
Diversification Opportunities for DCB Bank and Federal Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DCB and Federal is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding DCB Bank Limited and The Federal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Bank and DCB 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 DCB Bank Limited are associated (or correlated) with Federal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Bank has no effect on the direction of DCB Bank i.e., DCB Bank and Federal Bank go up and down completely randomly.
Pair Corralation between DCB Bank and Federal Bank
Assuming the 90 days trading horizon DCB Bank is expected to generate 9.57 times less return on investment than Federal Bank. But when comparing it to its historical volatility, DCB Bank Limited is 1.02 times less risky than Federal Bank. It trades about 0.02 of its potential returns per unit of risk. The Federal Bank is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 15,374 in The Federal Bank on September 2, 2024 and sell it today you would earn a total of 5,704 from holding The Federal Bank or generate 37.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DCB Bank Limited vs. The Federal Bank
Performance |
| Timeline |
| DCB Bank Limited |
| Federal Bank |
DCB Bank and Federal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DCB Bank and Federal Bank
The main advantage of trading using opposite DCB Bank and Federal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DCB Bank position performs unexpectedly, Federal 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 Federal Bank will offset losses from the drop in Federal Bank's long position.The idea behind DCB Bank Limited and The Federal 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.| Federal Bank vs. Foods Inns Limited | Federal Bank vs. Dev Information Technology | Federal Bank vs. Univa Foods Limited | Federal Bank vs. Mrs Bectors Food |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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