Correlation Between STANDARD BANK and NICO HOLDINGS

Can any of the company-specific risk be diversified away by investing in both STANDARD BANK and NICO HOLDINGS 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 NICO HOLDINGS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STANDARD BANK LIMITED and NICO HOLDINGS LIMITED, you can compare the effects of market volatilities on STANDARD BANK and NICO HOLDINGS 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 NICO HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of STANDARD BANK and NICO HOLDINGS.

Diversification Opportunities for STANDARD BANK and NICO HOLDINGS

0.8

Correlation Coefficient

STANDARD BANK  NICO HOLDINGS

Very poor diversification

The 3 months correlation between STANDARD and NICO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding STANDARD BANK LIMITED and NICO HOLDINGS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICO HOLDINGS LIMITED 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 LIMITED are associated (or correlated) with NICO HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICO HOLDINGS LIMITED has no effect on the direction of STANDARD BANK i.e., STANDARD BANK and NICO HOLDINGS go up and down completely randomly.

Pair Corralation between STANDARD BANK and NICO HOLDINGS

Assuming the 90 days trading horizon STANDARD BANK LIMITED is expected to generate 1473.75 times more return on investment than NICO HOLDINGS. However, STANDARD BANK is 1473.75 times more volatile than NICO HOLDINGS LIMITED. It trades about 0.34 of its potential returns per unit of risk. NICO HOLDINGS LIMITED is currently generating about -0.19 per unit of risk. If you would invest  600,017  in STANDARD BANK LIMITED on October 20, 2024 and sell it today you would earn a total of  89,984  from holding STANDARD BANK LIMITED or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

STANDARD BANK LIMITED  vs.  NICO HOLDINGS LIMITED

STANDARD BANK LIMITED

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STANDARD BANK LIMITED are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, STANDARD BANK reported solid returns over the last few months and may actually be approaching a breakup point.

NICO HOLDINGS LIMITED

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NICO HOLDINGS LIMITED are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NICO HOLDINGS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STANDARD BANK and NICO HOLDINGS

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

The idea behind STANDARD BANK LIMITED and NICO HOLDINGS LIMITED 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.