Correlation Between Thomas Scott and State Bank

Can any of the company-specific risk be diversified away by investing in both Thomas Scott and State Bank 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 Thomas Scott and State Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thomas Scott Limited and State Bank of, you can compare the effects of market volatilities on Thomas Scott and State Bank 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 Thomas Scott with a short position of State Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thomas Scott and State Bank.

Diversification Opportunities for Thomas Scott and State Bank

0.33

Correlation Coefficient

Thomas Scott  State Bank

Weak diversification

The 3 months correlation between Thomas and State is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Thomas Scott Limited and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank and Thomas Scott 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 Thomas Scott Limited are associated (or correlated) with State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of Thomas Scott i.e., Thomas Scott and State Bank go up and down completely randomly.

Pair Corralation between Thomas Scott and State Bank

Assuming the 90 days trading horizon Thomas Scott Limited is expected to generate 2.37 times more return on investment than State Bank. However, Thomas Scott is 2.37 times more volatile than State Bank of. It trades about 0.26 of its potential returns per unit of risk. State Bank of is currently generating about 0.02 per unit of risk. If you would invest  25,379  in Thomas Scott Limited on September 22, 2024 and sell it today you would earn a total of  19,987  from holding Thomas Scott Limited or generate 78.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Thomas Scott Limited  vs.  State Bank of

Thomas Scott Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

State Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 1 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thomas Scott and State Bank

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

The idea behind Thomas Scott Limited and State Bank of 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.