Correlation Between Investec Limited and Standard Bank

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

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

Diversification Opportunities for Investec Limited and Standard Bank

-0.31

Correlation Coefficient

Investec Limited  Standard Bank

Very good diversification

The 3 months correlation between Investec and Standard is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Investec Limited NON 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 Investec Limited 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 Investec Limited NON 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 Investec Limited i.e., Investec Limited and Standard Bank go up and down completely randomly.

Pair Corralation between Investec Limited and Standard Bank

Assuming the 90 days trading horizon Investec Limited is expected to generate 586.97 times less return on investment than Standard Bank. But when comparing it to its historical volatility, Investec Limited NON is 123.22 times less risky than Standard Bank. It trades about 0.03 of its potential returns per unit of risk. Standard Bank Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,100  in Standard Bank Group on September 14, 2024 and sell it today you would earn a total of  400.00  from holding Standard Bank Group or generate 6.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Investec Limited NON  vs.  Standard Bank Group

Investec Limited NON

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Limited NON are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Investec Limited is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 comparatively stable basic indicators, Standard Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Investec Limited and Standard Bank

The main advantage of trading using opposite Investec Limited and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Limited 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 Investec Limited NON 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..