Correlation Between State Bank and THORNEY TECHS
Can any of the company-specific risk be diversified away by investing in both State Bank and THORNEY TECHS 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 THORNEY TECHS 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 THORNEY TECHS LTD, you can compare the effects of market volatilities on State Bank and THORNEY TECHS 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 THORNEY TECHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and THORNEY TECHS.
Diversification Opportunities for State Bank and THORNEY TECHS
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between State and THORNEY is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of State Bank i.e., State Bank and THORNEY TECHS go up and down completely randomly.
Pair Corralation between State Bank and THORNEY TECHS
Assuming the 90 days horizon State Bank of is expected to generate 0.89 times more return on investment than THORNEY TECHS. However, State Bank of is 1.12 times less risky than THORNEY TECHS. It trades about 0.1 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about 0.03 per unit of risk. If you would invest 8,500 in State Bank of on August 28, 2024 and sell it today you would earn a total of 400.00 from holding State Bank of or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
State Bank of vs. THORNEY TECHS LTD
Performance |
| Timeline |
| State Bank |
| THORNEY TECHS LTD |
State Bank and THORNEY TECHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and THORNEY TECHS
The main advantage of trading using opposite State Bank and THORNEY TECHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, THORNEY TECHS 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 THORNEY TECHS will offset losses from the drop in THORNEY TECHS's long position.The idea behind State Bank of and THORNEY TECHS LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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