Correlation Between State Bank and ITI
Can any of the company-specific risk be diversified away by investing in both State Bank and ITI 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 ITI 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 ITI Limited, you can compare the effects of market volatilities on State Bank and ITI 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 ITI. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and ITI.
Diversification Opportunities for State Bank and ITI
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between State and ITI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI 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 ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of State Bank i.e., State Bank and ITI go up and down completely randomly.
Pair Corralation between State Bank and ITI
Assuming the 90 days trading horizon State Bank is expected to generate 3.51 times less return on investment than ITI. But when comparing it to its historical volatility, State Bank of is 2.3 times less risky than ITI. It trades about 0.06 of its potential returns per unit of risk. ITI Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,225 in ITI Limited on September 14, 2024 and sell it today you would earn a total of 26,320 from holding ITI Limited or generate 257.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.39% |
| Values | Daily Returns |
State Bank of vs. ITI Limited
Performance |
| Timeline |
| State Bank |
| ITI Limited |
State Bank and ITI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and ITI
The main advantage of trading using opposite State Bank and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, ITI 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 ITI will offset losses from the drop in ITI's long position.| State Bank vs. Reliance Industries Limited | State Bank vs. Oil Natural Gas | State Bank vs. ICICI Bank 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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