Correlation Between Trematon Capital and Standard Bank

Can any of the company-specific risk be diversified away by investing in both Trematon Capital and Standard Bank 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 Trematon Capital and Standard Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trematon Capital Investments and Standard Bank Group, you can compare the effects of market volatilities on Trematon Capital and Standard Bank 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 Trematon Capital with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trematon Capital and Standard Bank.

Diversification Opportunities for Trematon Capital and Standard Bank

0.63

Correlation Coefficient

Trematon Capital  Standard Bank

Poor diversification

The 3 months correlation between Trematon and Standard is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Trematon Capital Investments and Standard Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Bank Group and Trematon Capital 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 Trematon Capital Investments are associated (or correlated) with Standard Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Bank Group has no effect on the direction of Trematon Capital i.e., Trematon Capital and Standard Bank go up and down completely randomly.

Pair Corralation between Trematon Capital and Standard Bank

Assuming the 90 days trading horizon Trematon Capital is expected to generate 2.69 times less return on investment than Standard Bank. In addition to that, Trematon Capital is 3.02 times more volatile than Standard Bank Group. It trades about 0.01 of its total potential returns per unit of risk. Standard Bank Group is currently generating about 0.07 per unit of volatility. If you would invest  1,447,700  in Standard Bank Group on September 21, 2024 and sell it today you would earn a total of  794,900  from holding Standard Bank Group or generate 54.91% return on investment over 90 days.

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

Trematon Capital Investments  vs.  Standard Bank Group

Trematon Capital Inv

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trematon Capital Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Trematon Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Standard Bank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Bank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Trematon Capital and Standard Bank

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

The idea behind Trematon Capital Investments and Standard Bank Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.