Correlation Between State Bank and United Drilling
Can any of the company-specific risk be diversified away by investing in both State Bank and United Drilling 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 United Drilling 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 United Drilling Tools, you can compare the effects of market volatilities on State Bank and United Drilling 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 United Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and United Drilling.
Diversification Opportunities for State Bank and United Drilling
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between State and United is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and United Drilling Tools in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Drilling Tools 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 United Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Drilling Tools has no effect on the direction of State Bank i.e., State Bank and United Drilling go up and down completely randomly.
Pair Corralation between State Bank and United Drilling
Assuming the 90 days trading horizon State Bank of is expected to generate 0.61 times more return on investment than United Drilling. However, State Bank of is 1.64 times less risky than United Drilling. It trades about 0.1 of its potential returns per unit of risk. United Drilling Tools is currently generating about 0.04 per unit of risk. If you would invest 55,420 in State Bank of on September 14, 2024 and sell it today you would earn a total of 29,950 from holding State Bank of or generate 54.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.25% |
| Values | Daily Returns |
State Bank of vs. United Drilling Tools
Performance |
| Timeline |
| State Bank |
| United Drilling Tools |
State Bank and United Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and United Drilling
The main advantage of trading using opposite State Bank and United Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, United Drilling 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 United Drilling will offset losses from the drop in United Drilling's long position.| State Bank vs. Reliance Industries Limited | State Bank vs. Oil Natural Gas | State Bank vs. ICICI Bank Limited |
| United Drilling vs. Digjam Limited | United Drilling vs. Gujarat Raffia Industries | United Drilling vs. State Bank of | United Drilling vs. Zomato 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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