Correlation Between State Bank and Aurora Investment

Can any of the company-specific risk be diversified away by investing in both State Bank and Aurora Investment 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 Aurora Investment 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 Aurora Investment Trust, you can compare the effects of market volatilities on State Bank and Aurora Investment 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 Aurora Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Aurora Investment.

Diversification Opportunities for State Bank and Aurora Investment

-0.48

Correlation Coefficient

State Bank  Aurora Investment

Very good diversification

The 3 months correlation between State and Aurora is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Aurora Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Investment Trust 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 Aurora Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Investment Trust has no effect on the direction of State Bank i.e., State Bank and Aurora Investment go up and down completely randomly.

Pair Corralation between State Bank and Aurora Investment

Assuming the 90 days trading horizon State Bank of is expected to under-perform the Aurora Investment. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.64 times less risky than Aurora Investment. The stock trades about -0.37 of its potential returns per unit of risk. The Aurora Investment Trust is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  23,100  in Aurora Investment Trust on September 29, 2024 and sell it today you would lose (500.00) from holding Aurora Investment Trust or give up 2.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

State Bank of  vs.  Aurora Investment Trust

State Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aurora Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with State Bank and Aurora Investment

The main advantage of trading using opposite State Bank and Aurora Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, Aurora Investment 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 Aurora Investment will offset losses from the drop in Aurora Investment's long position.

The idea behind State Bank of and Aurora Investment Trust 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.