Correlation Between SLM Corp and Old Mutual

Can any of the company-specific risk be diversified away by investing in both SLM Corp and Old Mutual 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 SLM Corp and Old Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sanlam and Old Mutual, you can compare the effects of market volatilities on SLM Corp and Old Mutual 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 SLM Corp with a short position of Old Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLM Corp and Old Mutual.

Diversification Opportunities for SLM Corp and Old Mutual

0.78

Correlation Coefficient

SLM Corp  Old Mutual

Poor diversification

The 3 months correlation between SLM and Old is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sanlam and Old Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Mutual and SLM Corp 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 Sanlam are associated (or correlated) with Old Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Mutual has no effect on the direction of SLM Corp i.e., SLM Corp and Old Mutual go up and down completely randomly.

Pair Corralation between SLM Corp and Old Mutual

Assuming the 90 days trading horizon Sanlam is expected to generate 1.14 times more return on investment than Old Mutual. However, SLM Corp is 1.14 times more volatile than Old Mutual. It trades about -0.16 of its potential returns per unit of risk. Old Mutual is currently generating about -0.24 per unit of risk. If you would invest  877,300  in Sanlam on October 25, 2024 and sell it today you would lose (37,800) from holding Sanlam or give up 4.31% of portfolio value over 90 days.

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

Sanlam  vs.  Old Mutual

SLM Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanlam has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SLM Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Old Mutual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Mutual has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Old Mutual is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SLM Corp and Old Mutual

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

The idea behind Sanlam and Old Mutual 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.