Correlation Between Indian Railway and State Bank
Can any of the company-specific risk be diversified away by investing in both Indian Railway and State 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 Indian Railway and State Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Railway Finance and State Bank of, you can compare the effects of market volatilities on Indian Railway and State 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 Indian Railway with a short position of State Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Railway and State Bank.
Diversification Opportunities for Indian Railway and State Bank
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indian and State is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Indian Railway Finance and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank and Indian Railway 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 Indian Railway Finance are associated (or correlated) with State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of Indian Railway i.e., Indian Railway and State Bank go up and down completely randomly.
Pair Corralation between Indian Railway and State Bank
Assuming the 90 days trading horizon Indian Railway Finance is expected to under-perform the State Bank. In addition to that, Indian Railway is 2.01 times more volatile than State Bank of. It trades about -0.17 of its total potential returns per unit of risk. State Bank of is currently generating about -0.12 per unit of volatility. If you would invest 78,830 in State Bank of on October 31, 2024 and sell it today you would lose (2,985) from holding State Bank of or give up 3.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Indian Railway Finance vs. State Bank of
Performance |
| Timeline |
| Indian Railway Finance |
| State Bank |
Indian Railway and State Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Railway and State Bank
The main advantage of trading using opposite Indian Railway and State Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Railway position performs unexpectedly, State 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 State Bank will offset losses from the drop in State Bank's long position.| Indian Railway vs. Sapphire Foods India | Indian Railway vs. Iris Clothings Limited | Indian Railway vs. Ratnamani Metals Tubes | Indian Railway vs. Varun Beverages Limited |
| State Bank vs. CREDITACCESS GRAMEEN LIMITED | State Bank vs. Manaksia Coated Metals | State Bank vs. Arman Financial Services | State Bank vs. Hilton Metal Forging |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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