Correlation Between State Bank and KEC International
Can any of the company-specific risk be diversified away by investing in both State Bank and KEC International 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 KEC International 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 KEC International Limited, you can compare the effects of market volatilities on State Bank and KEC International 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 KEC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and KEC International.
Diversification Opportunities for State Bank and KEC International
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between State and KEC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and KEC International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEC International 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 KEC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEC International has no effect on the direction of State Bank i.e., State Bank and KEC International go up and down completely randomly.
Pair Corralation between State Bank and KEC International
Assuming the 90 days trading horizon State Bank is expected to generate 21.58 times less return on investment than KEC International. But when comparing it to its historical volatility, State Bank of is 1.56 times less risky than KEC International. It trades about 0.01 of its potential returns per unit of risk. KEC International Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 92,455 in KEC International Limited on August 30, 2024 and sell it today you would earn a total of 9,850 from holding KEC International Limited or generate 10.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Bank of vs. KEC International Limited
Performance |
| Timeline |
| State Bank |
| KEC International |
State Bank and KEC International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and KEC International
The main advantage of trading using opposite State Bank and KEC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, KEC International 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 KEC International will offset losses from the drop in KEC International's long position.| State Bank vs. Transport of | State Bank vs. Krebs Biochemicals and | State Bank vs. Shivalik Bimetal Controls | State Bank vs. Rajnandini Metal Limited |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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