Correlation Between Mutual Federal and Standard Bank

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

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

Diversification Opportunities for Mutual Federal and Standard Bank

-0.66

Correlation Coefficient

Mutual Federal  Standard Bank

Excellent diversification

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

Pair Corralation between Mutual Federal and Standard Bank

Given the investment horizon of 90 days Mutual Federal Bancorp is expected to generate 3.12 times more return on investment than Standard Bank. However, Mutual Federal is 3.12 times more volatile than Standard Bank Group. It trades about 0.13 of its potential returns per unit of risk. Standard Bank Group is currently generating about -0.33 per unit of risk. If you would invest  275.00  in Mutual Federal Bancorp on October 11, 2024 and sell it today you would earn a total of  25.00  from holding Mutual Federal Bancorp or generate 9.09% return on investment over 90 days.

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

Mutual Federal Bancorp  vs.  Standard Bank Group

Mutual Federal Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mutual Federal Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Mutual Federal sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mutual Federal and Standard Bank

The main advantage of trading using opposite Mutual Federal and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mutual Federal 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 Mutual Federal Bancorp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.