Correlation Between Nedbank and Investec

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

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

Diversification Opportunities for Nedbank and Investec

0.28

Correlation Coefficient

Nedbank  Investec

Modest diversification

The 3 months correlation between Nedbank and Investec is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nedbank Group and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec and Nedbank 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 Nedbank Group are associated (or correlated) with Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of Nedbank i.e., Nedbank and Investec go up and down completely randomly.

Pair Corralation between Nedbank and Investec

Assuming the 90 days trading horizon Nedbank Group is expected to generate 0.98 times more return on investment than Investec. However, Nedbank Group is 1.02 times less risky than Investec. It trades about 0.07 of its potential returns per unit of risk. Investec is currently generating about 0.04 per unit of risk. If you would invest  1,823,862  in Nedbank Group on September 26, 2024 and sell it today you would earn a total of  1,005,038  from holding Nedbank Group or generate 55.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Nedbank Group  vs.  Investec

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nedbank and Investec

The main advantage of trading using opposite Nedbank and Investec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nedbank position performs unexpectedly, Investec 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 Investec will offset losses from the drop in Investec's long position.

The idea behind Nedbank Group and Investec 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 Stocks Directory module to find actively traded stocks across global markets.