Correlation Between Aveng and Standard Bank

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

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

Diversification Opportunities for Aveng and Standard Bank

0.6

Correlation Coefficient

Aveng  Standard Bank

Poor diversification

The 3 months correlation between Aveng and Standard is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aveng 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 Aveng 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 Aveng 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 Aveng i.e., Aveng and Standard Bank go up and down completely randomly.

Pair Corralation between Aveng and Standard Bank

Assuming the 90 days trading horizon Aveng is expected to under-perform the Standard Bank. In addition to that, Aveng is 2.73 times more volatile than Standard Bank Group. It trades about 0.0 of its total potential returns per unit of risk. Standard Bank Group is currently generating about 0.02 per unit of volatility. If you would invest  863,058  in Standard Bank Group on September 23, 2024 and sell it today you would earn a total of  96,442  from holding Standard Bank Group or generate 11.17% return on investment over 90 days.

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

Aveng  vs.  Standard Bank Group

Aveng

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Standard Bank Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aveng and Standard Bank

The main advantage of trading using opposite Aveng and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aveng 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 Aveng 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.