Correlation Between Reinet Investments and Standard Bank

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

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

Diversification Opportunities for Reinet Investments and Standard Bank

0.21

Correlation Coefficient

Reinet Investments  Standard Bank

Modest diversification

The 3 months correlation between Reinet and Standard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Reinet Investments SCA 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 Reinet Investments 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 Reinet Investments SCA 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 Reinet Investments i.e., Reinet Investments and Standard Bank go up and down completely randomly.

Pair Corralation between Reinet Investments and Standard Bank

Assuming the 90 days trading horizon Reinet Investments SCA is expected to under-perform the Standard Bank. But the stock apears to be less risky and, when comparing its historical volatility, Reinet Investments SCA is 1.05 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 0.09 of returns per unit of risk over similar time horizon. If you would invest  898,000  in Standard Bank Group on September 24, 2024 and sell it today you would earn a total of  61,500  from holding Standard Bank Group or generate 6.85% return on investment over 90 days.

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

Reinet Investments SCA  vs.  Standard Bank Group

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinet Investments SCA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Standard Bank Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Reinet Investments and Standard Bank

The main advantage of trading using opposite Reinet Investments and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinet Investments 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 Reinet Investments SCA 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.