Correlation Between State Bank and Apple

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

Diversification Opportunities for State Bank and Apple

0.2

Correlation Coefficient

State Bank  Apple

Modest diversification

The 3 months correlation between State and Apple is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of State Bank i.e., State Bank and Apple go up and down completely randomly.

Pair Corralation between State Bank and Apple

Assuming the 90 days trading horizon State Bank is expected to generate 1.11 times less return on investment than Apple. But when comparing it to its historical volatility, State Bank of is 1.12 times less risky than Apple. It trades about 0.06 of its potential returns per unit of risk. Apple Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14,111  in Apple Inc on June 21, 2024 and sell it today you would earn a total of  7,989  from holding Apple Inc or generate 56.62% return on investment over 90 days.

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

State Bank of  vs.  Apple Inc

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Apple Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with State Bank and Apple

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

The idea behind State Bank of and Apple Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.