Correlation Between Standard Bank and Main Street

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

Diversification Opportunities for Standard Bank and Main Street

0.13

Correlation Coefficient

Standard Bank  Main Street

Average diversification

The 3 months correlation between Standard and Main is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of Standard Bank i.e., Standard Bank and Main Street go up and down completely randomly.

Pair Corralation between Standard Bank and Main Street

Assuming the 90 days horizon Standard Bank Group is expected to generate 2.07 times more return on investment than Main Street. However, Standard Bank is 2.07 times more volatile than Main Street Financial. It trades about 0.1 of its potential returns per unit of risk. Main Street Financial is currently generating about -0.06 per unit of risk. If you would invest  1,218  in Standard Bank Group on December 21, 2024 and sell it today you would earn a total of  128.00  from holding Standard Bank Group or generate 10.51% return on investment over 90 days.

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

Standard Bank Group  vs.  Main Street Financial

Standard Bank Group

Risk-Adjusted Performance

Modest

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 fairly weak essential indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Main Street Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Street Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Standard Bank and Main Street

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

The idea behind Standard Bank Group and Main Street Financial 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.