Correlation Between State Bank and Valiant Organics

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

Diversification Opportunities for State Bank and Valiant Organics

-0.56

Correlation Coefficient

State Bank  Valiant Organics

Excellent diversification

The 3 months correlation between State and Valiant is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Valiant Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valiant Organics 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 Valiant Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valiant Organics has no effect on the direction of State Bank i.e., State Bank and Valiant Organics go up and down completely randomly.

Pair Corralation between State Bank and Valiant Organics

Assuming the 90 days trading horizon State Bank of is expected to generate 0.76 times more return on investment than Valiant Organics. However, State Bank of is 1.32 times less risky than Valiant Organics. It trades about 0.09 of its potential returns per unit of risk. Valiant Organics Limited is currently generating about -0.22 per unit of risk. If you would invest  79,275  in State Bank of on September 18, 2024 and sell it today you would earn a total of  6,820  from holding State Bank of or generate 8.6% return on investment over 90 days.

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

State Bank of  vs.  Valiant Organics Limited

State Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valiant Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valiant Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with State Bank and Valiant Organics

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

The idea behind State Bank of and Valiant Organics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.