Correlation Between State Bank and Power Finance
Can any of the company-specific risk be diversified away by investing in both State Bank and Power Finance 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 Power Finance 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 Power Finance, you can compare the effects of market volatilities on State Bank and Power Finance 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 Power Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Power Finance.
Diversification Opportunities for State Bank and Power Finance
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and Power is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance 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 Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of State Bank i.e., State Bank and Power Finance go up and down completely randomly.
Pair Corralation between State Bank and Power Finance
Assuming the 90 days trading horizon State Bank of is expected to generate 0.47 times more return on investment than Power Finance. However, State Bank of is 2.12 times less risky than Power Finance. It trades about -0.11 of its potential returns per unit of risk. Power Finance is currently generating about -0.11 per unit of risk. If you would invest 80,120 in State Bank of on November 3, 2024 and sell it today you would lose (2,830) from holding State Bank of or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Bank of vs. Power Finance
Performance |
| Timeline |
| State Bank |
| Power Finance |
State Bank and Power Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and Power Finance
The main advantage of trading using opposite State Bank and Power Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, Power Finance 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 Power Finance will offset losses from the drop in Power Finance's long position.| State Bank vs. Tamilnadu Telecommunication Limited | State Bank vs. Mangalore Chemicals Fertilizers | State Bank vs. Ortel Communications Limited | State Bank vs. Paramount Communications Limited |
| Power Finance vs. Kotak Mahindra Bank | Power Finance vs. The Investment Trust | Power Finance vs. Karur Vysya Bank | Power Finance vs. Mask Investments 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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