Correlation Between Commercial International and Standard Bank

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

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

Diversification Opportunities for Commercial International and Standard Bank

0.66

Correlation Coefficient

Commercial International  Standard Bank

Poor diversification

The 3 months correlation between Commercial and Standard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Commercial International Bank 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 Commercial International 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 Commercial International Bank 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 Commercial International i.e., Commercial International and Standard Bank go up and down completely randomly.

Pair Corralation between Commercial International and Standard Bank

Assuming the 90 days horizon Commercial International is expected to generate 6.27 times less return on investment than Standard Bank. In addition to that, Commercial International is 1.18 times more volatile than Standard Bank Group. It trades about 0.01 of its total potential returns per unit of risk. Standard Bank Group is currently generating about 0.04 per unit of volatility. If you would invest  884.00  in Standard Bank Group on October 25, 2024 and sell it today you would earn a total of  318.00  from holding Standard Bank Group or generate 35.97% return on investment over 90 days.

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

Commercial International Bank  vs.  Standard Bank Group

Commercial International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial International Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Commercial International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Standard Bank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Bank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Commercial International and Standard Bank

The main advantage of trading using opposite Commercial International and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial International 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 Commercial International Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.