Correlation Between STANDARD BANK and TELEKOM NETWORK

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

Diversification Opportunities for STANDARD BANK and TELEKOM NETWORK

0.75

Correlation Coefficient

STANDARD BANK  TELEKOM NETWORK

Poor diversification

The 3 months correlation between STANDARD and TELEKOM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding STANDARD BANK LIMITED and TELEKOM NETWORK MALAWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELEKOM NETWORK MALAWI 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 TELEKOM NETWORK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELEKOM NETWORK MALAWI has no effect on the direction of STANDARD BANK i.e., STANDARD BANK and TELEKOM NETWORK go up and down completely randomly.

Pair Corralation between STANDARD BANK and TELEKOM NETWORK

Assuming the 90 days trading horizon STANDARD BANK LIMITED is expected to generate 1.16 times more return on investment than TELEKOM NETWORK. However, STANDARD BANK is 1.16 times more volatile than TELEKOM NETWORK MALAWI. It trades about 0.21 of its potential returns per unit of risk. TELEKOM NETWORK MALAWI is currently generating about 0.22 per unit of risk. If you would invest  533,509  in STANDARD BANK LIMITED on October 11, 2024 and sell it today you would earn a total of  114,887  from holding STANDARD BANK LIMITED or generate 21.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

STANDARD BANK LIMITED  vs.  TELEKOM NETWORK MALAWI

STANDARD BANK LIMITED

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STANDARD BANK LIMITED are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, STANDARD BANK reported solid returns over the last few months and may actually be approaching a breakup point.

TELEKOM NETWORK MALAWI

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TELEKOM NETWORK MALAWI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, TELEKOM NETWORK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STANDARD BANK and TELEKOM NETWORK

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

The idea behind STANDARD BANK LIMITED and TELEKOM NETWORK MALAWI 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.