Correlation Between State Bank and WINMARK

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

Diversification Opportunities for State Bank and WINMARK

0.83

Correlation Coefficient

State Bank  WINMARK

Very poor diversification

The 3 months correlation between State and WINMARK is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and WINMARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINMARK 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 WINMARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINMARK has no effect on the direction of State Bank i.e., State Bank and WINMARK go up and down completely randomly.

Pair Corralation between State Bank and WINMARK

Assuming the 90 days horizon State Bank is expected to generate 2.57 times less return on investment than WINMARK. But when comparing it to its historical volatility, State Bank of is 1.01 times less risky than WINMARK. It trades about 0.09 of its potential returns per unit of risk. WINMARK is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  35,120  in WINMARK on September 4, 2024 and sell it today you would earn a total of  3,880  from holding WINMARK or generate 11.05% return on investment over 90 days.

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

State Bank of  vs.  WINMARK

State Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WINMARK

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WINMARK are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, WINMARK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and WINMARK

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

The idea behind State Bank of and WINMARK 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.