Correlation Between State Bank and Fresenius Medical

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

Diversification Opportunities for State Bank and Fresenius Medical

0.79

Correlation Coefficient

State Bank  Fresenius Medical

Poor diversification

The 3 months correlation between State and Fresenius is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of State Bank i.e., State Bank and Fresenius Medical go up and down completely randomly.

Pair Corralation between State Bank and Fresenius Medical

Assuming the 90 days horizon State Bank is expected to generate 1.42 times less return on investment than Fresenius Medical. In addition to that, State Bank is 1.06 times more volatile than Fresenius Medical Care. It trades about 0.11 of its total potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.17 per unit of volatility. If you would invest  3,758  in Fresenius Medical Care on September 17, 2024 and sell it today you would earn a total of  744.00  from holding Fresenius Medical Care or generate 19.8% 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.  Fresenius Medical Care

State Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Fresenius Medical Care

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and Fresenius Medical

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

The idea behind State Bank of and Fresenius Medical Care 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.