Correlation Between State Bank and GAIL
Can any of the company-specific risk be diversified away by investing in both State Bank and GAIL 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 GAIL 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 GAIL Limited, you can compare the effects of market volatilities on State Bank and GAIL 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 GAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and GAIL.
Diversification Opportunities for State Bank and GAIL
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and GAIL is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and GAIL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAIL Limited 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 GAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAIL Limited has no effect on the direction of State Bank i.e., State Bank and GAIL go up and down completely randomly.
Pair Corralation between State Bank and GAIL
Assuming the 90 days trading horizon State Bank is expected to generate 1.21 times less return on investment than GAIL. But when comparing it to its historical volatility, State Bank of is 1.39 times less risky than GAIL. It trades about 0.08 of its potential returns per unit of risk. GAIL Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13,775 in GAIL Limited on September 2, 2024 and sell it today you would earn a total of 6,171 from holding GAIL Limited or generate 44.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.59% |
| Values | Daily Returns |
State Bank of vs. GAIL Limited
Performance |
| Timeline |
| State Bank |
| GAIL Limited |
State Bank and GAIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and GAIL
The main advantage of trading using opposite State Bank and GAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, GAIL 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 GAIL will offset losses from the drop in GAIL's long position.| State Bank vs. Reliance Communications Limited | State Bank vs. Bodhi Tree Multimedia | State Bank vs. Network18 Media Investments | State Bank vs. General Insurance |
| GAIL vs. Oriental Hotels Limited | GAIL vs. V Mart Retail Limited | GAIL vs. Lemon Tree Hotels | GAIL vs. Sonata Software 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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