Correlation Between State Bank and Chalet Hotels

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

Diversification Opportunities for State Bank and Chalet Hotels

0.12

Correlation Coefficient

State Bank  Chalet Hotels

Average diversification

The 3 months correlation between State and Chalet is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Chalet Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalet Hotels Limited 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 Chalet Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalet Hotels Limited has no effect on the direction of State Bank i.e., State Bank and Chalet Hotels go up and down completely randomly.

Pair Corralation between State Bank and Chalet Hotels

Assuming the 90 days trading horizon State Bank of is expected to generate 0.82 times more return on investment than Chalet Hotels. However, State Bank of is 1.22 times less risky than Chalet Hotels. It trades about 0.05 of its potential returns per unit of risk. Chalet Hotels Limited is currently generating about 0.0 per unit of risk. If you would invest  81,875  in State Bank of on September 5, 2024 and sell it today you would earn a total of  3,520  from holding State Bank of or generate 4.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

State Bank of  vs.  Chalet Hotels Limited

State Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Chalet Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chalet Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Chalet Hotels is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Bank and Chalet Hotels

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

The idea behind State Bank of and Chalet Hotels Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.