Correlation Between Standard Bank and Europa Metals

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

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

Diversification Opportunities for Standard Bank and Europa Metals

-0.2

Correlation Coefficient

Standard Bank  Europa Metals

Good diversification

The 3 months correlation between Standard and Europa is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Standard Bank 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 Standard Bank Group are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Standard Bank i.e., Standard Bank and Europa Metals go up and down completely randomly.

Pair Corralation between Standard Bank and Europa Metals

Assuming the 90 days trading horizon Standard Bank Group is expected to generate 0.28 times more return on investment than Europa Metals. However, Standard Bank Group is 3.55 times less risky than Europa Metals. It trades about 0.1 of its potential returns per unit of risk. Europa Metals is currently generating about -0.14 per unit of risk. If you would invest  2,213,900  in Standard Bank Group on December 29, 2024 and sell it today you would earn a total of  199,200  from holding Standard Bank Group or generate 9.0% return on investment over 90 days.

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

Standard Bank Group  vs.  Europa Metals

Standard Bank Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Europa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Standard Bank and Europa Metals

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

The idea behind Standard Bank Group and Europa Metals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.