Correlation Between State Bank and Consolidated Construction
Can any of the company-specific risk be diversified away by investing in both State Bank and Consolidated Construction 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 Consolidated Construction 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 Consolidated Construction Consortium, you can compare the effects of market volatilities on State Bank and Consolidated Construction 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 Consolidated Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Consolidated Construction.
Diversification Opportunities for State Bank and Consolidated Construction
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Consolidated is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction 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 Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of State Bank i.e., State Bank and Consolidated Construction go up and down completely randomly.
Pair Corralation between State Bank and Consolidated Construction
Assuming the 90 days trading horizon State Bank is expected to generate 20.85 times less return on investment than Consolidated Construction. But when comparing it to its historical volatility, State Bank of is 19.35 times less risky than Consolidated Construction. It trades about 0.04 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 140.00 in Consolidated Construction Consortium on November 27, 2024 and sell it today you would earn a total of 1,246 from holding Consolidated Construction Consortium or generate 890.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
State Bank of vs. Consolidated Construction Cons
Performance |
| Timeline |
| State Bank |
| Consolidated Construction |
State Bank and Consolidated Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and Consolidated Construction
The main advantage of trading using opposite State Bank and Consolidated Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, Consolidated Construction 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 Consolidated Construction will offset losses from the drop in Consolidated Construction's long position.| State Bank vs. Computer Age Management | State Bank vs. Univa Foods Limited | State Bank vs. LT Foods Limited | State Bank vs. V Mart Retail Limited |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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