Correlation Between Kap Industrial and Standard Bank

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Can any of the company-specific risk be diversified away by investing in both Kap Industrial 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 Kap Industrial and Standard Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kap Industrial Holdings and Standard Bank Group, you can compare the effects of market volatilities on Kap Industrial 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 Kap Industrial with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and Standard Bank.

Diversification Opportunities for Kap Industrial and Standard Bank

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Kap and Standard is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings 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 Kap Industrial 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 Kap Industrial Holdings 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 Kap Industrial i.e., Kap Industrial and Standard Bank go up and down completely randomly.

Pair Corralation between Kap Industrial and Standard Bank

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Standard Bank. In addition to that, Kap Industrial is 1.85 times more volatile than Standard Bank Group. It trades about -0.43 of its total potential returns per unit of risk. Standard Bank Group is currently generating about 0.03 per unit of volatility. If you would invest  937,900  in Standard Bank Group on October 5, 2024 and sell it today you would earn a total of  5,100  from holding Standard Bank Group or generate 0.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kap Industrial Holdings  vs.  Standard Bank Group

 Performance 
       Timeline  
Kap Industrial Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Standard Bank Group 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 4 (%) 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.

Kap Industrial and Standard Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kap Industrial and Standard Bank

The main advantage of trading using opposite Kap Industrial and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial 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 Kap Industrial Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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