Correlation Between State Bank and Southern Petrochemicals
Can any of the company-specific risk be diversified away by investing in both State Bank and Southern Petrochemicals 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 Southern Petrochemicals 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 Southern Petrochemicals Industries, you can compare the effects of market volatilities on State Bank and Southern Petrochemicals 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 Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Southern Petrochemicals.
Diversification Opportunities for State Bank and Southern Petrochemicals
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and Southern is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals 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 Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of State Bank i.e., State Bank and Southern Petrochemicals go up and down completely randomly.
Pair Corralation between State Bank and Southern Petrochemicals
Assuming the 90 days trading horizon State Bank is expected to generate 1.3 times less return on investment than Southern Petrochemicals. In addition to that, State Bank is 1.03 times more volatile than Southern Petrochemicals Industries. It trades about 0.11 of its total potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about 0.15 per unit of volatility. If you would invest 7,271 in Southern Petrochemicals Industries on September 21, 2024 and sell it today you would earn a total of 360.00 from holding Southern Petrochemicals Industries or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Bank of vs. Southern Petrochemicals Indust
Performance |
| Timeline |
| State Bank |
| Southern Petrochemicals |
State Bank and Southern Petrochemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and Southern Petrochemicals
The main advantage of trading using opposite State Bank and Southern Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, Southern Petrochemicals 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 Southern Petrochemicals will offset losses from the drop in Southern Petrochemicals' long position.| State Bank vs. Nalwa Sons Investments | State Bank vs. GM Breweries Limited | State Bank vs. UTI Asset Management | State Bank vs. Computer Age Management |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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