Correlation Between State Bank and Monks Investment

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

Diversification Opportunities for State Bank and Monks Investment

0.63

Correlation Coefficient

State Bank  Monks Investment

Poor diversification

The 3 months correlation between State and Monks is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of State Bank i.e., State Bank and Monks Investment go up and down completely randomly.

Pair Corralation between State Bank and Monks Investment

Assuming the 90 days trading horizon State Bank is expected to generate 6.07 times less return on investment than Monks Investment. In addition to that, State Bank is 1.8 times more volatile than Monks Investment Trust. It trades about 0.01 of its total potential returns per unit of risk. Monks Investment Trust is currently generating about 0.13 per unit of volatility. If you would invest  117,400  in Monks Investment Trust on September 29, 2024 and sell it today you would earn a total of  8,000  from holding Monks Investment Trust or generate 6.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

State Bank of  vs.  Monks 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.

Monks Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Bank and Monks Investment

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

The idea behind State Bank of and Monks 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.