Correlation Between Pepkor Holdings and Standard Bank

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

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

Diversification Opportunities for Pepkor Holdings and Standard Bank

0.19

Correlation Coefficient

Pepkor Holdings  Standard Bank

Average diversification

The 3 months correlation between Pepkor and Standard is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor 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 Pepkor Holdings 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 Pepkor 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 Pepkor Holdings i.e., Pepkor Holdings and Standard Bank go up and down completely randomly.

Pair Corralation between Pepkor Holdings and Standard Bank

Assuming the 90 days trading horizon Pepkor Holdings is expected to under-perform the Standard Bank. But the stock apears to be less risky and, when comparing its historical volatility, Pepkor Holdings is 1.0 times less risky than Standard Bank. The stock trades about -0.13 of its potential returns per unit of risk. The Standard Bank Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  930,000  in Standard Bank Group on October 11, 2024 and sell it today you would earn a total of  12,000  from holding Standard Bank Group or generate 1.29% return on investment over 90 days.

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

Pepkor Holdings  vs.  Standard Bank Group

Pepkor Holdings

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Standard Bank Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 3 (%) 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.

Pair Trading with Pepkor Holdings and Standard Bank

The main advantage of trading using opposite Pepkor Holdings and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pepkor Holdings 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 Pepkor 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.