Correlation Between Bank Central and Standard Bank

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

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

Diversification Opportunities for Bank Central and Standard Bank

0.8

Correlation Coefficient

Bank Central  Standard Bank

Very poor diversification

The 3 months correlation between Bank and Standard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia 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 Bank Central 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 Bank Central Asia 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 Bank Central i.e., Bank Central and Standard Bank go up and down completely randomly.

Pair Corralation between Bank Central and Standard Bank

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Standard Bank. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.1 times less risky than Standard Bank. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Standard Bank Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  910.00  in Standard Bank Group on October 8, 2024 and sell it today you would earn a total of  290.00  from holding Standard Bank Group or generate 31.87% return on investment over 90 days.

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

Bank Central Asia  vs.  Standard Bank Group

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Bank Central and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central 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 Bank Central Asia 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..