Correlation Between Standard Bank and Italtile

Can any of the company-specific risk be diversified away by investing in both Standard Bank and Italtile 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 Italtile 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 Italtile, you can compare the effects of market volatilities on Standard Bank and Italtile 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 Italtile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and Italtile.

Diversification Opportunities for Standard Bank and Italtile

0.71

Correlation Coefficient

Standard Bank  Italtile

Poor diversification

The 3 months correlation between Standard and Italtile is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Italtile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Italtile 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 Italtile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Italtile has no effect on the direction of Standard Bank i.e., Standard Bank and Italtile go up and down completely randomly.

Pair Corralation between Standard Bank and Italtile

Assuming the 90 days trading horizon Standard Bank is expected to generate 1.93 times less return on investment than Italtile. But when comparing it to its historical volatility, Standard Bank Group is 1.62 times less risky than Italtile. It trades about 0.08 of its potential returns per unit of risk. Italtile is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  109,000  in Italtile on September 24, 2024 and sell it today you would earn a total of  27,000  from holding Italtile or generate 24.77% return on investment over 90 days.

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

Standard Bank Group  vs.  Italtile

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.

Italtile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Italtile 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, Italtile may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Standard Bank and Italtile

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

The idea behind Standard Bank Group and Italtile 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.