Correlation Between Coronation Global and Standard Bank

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

By analyzing existing cross correlation between Coronation Global Equity and Standard Bank Group, you can compare the effects of market volatilities on Coronation Global and Standard 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 Coronation Global with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coronation Global and Standard Bank.

Diversification Opportunities for Coronation Global and Standard Bank

0.68

Correlation Coefficient

Coronation Global  Standard Bank

Poor diversification

The 3 months correlation between Coronation and Standard is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Global Equity and Standard Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Bank Group and Coronation Global 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 Coronation Global Equity are associated (or correlated) with Standard Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Bank Group has no effect on the direction of Coronation Global i.e., Coronation Global and Standard Bank go up and down completely randomly.

Pair Corralation between Coronation Global and Standard Bank

Assuming the 90 days trading horizon Coronation Global Equity is expected to generate 0.9 times more return on investment than Standard Bank. However, Coronation Global Equity is 1.11 times less risky than Standard Bank. It trades about 0.3 of its potential returns per unit of risk. Standard Bank Group is currently generating about 0.08 per unit of risk. If you would invest  219.00  in Coronation Global Equity on September 12, 2024 and sell it today you would earn a total of  48.00  from holding Coronation Global Equity or generate 21.92% return on investment over 90 days.

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

Coronation Global Equity  vs.  Standard Bank Group

Coronation Global Equity

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Equity are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Coronation Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Standard Bank Group

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Standard Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coronation Global and Standard Bank

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

The idea behind Coronation Global Equity and Standard Bank Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.