Correlation Between ABSA Bank and Standard Bank
Can any of the company-specific risk be diversified away by investing in both ABSA Bank 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 ABSA Bank and Standard Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABSA Bank Limited and Standard Bank Group, you can compare the effects of market volatilities on ABSA Bank 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 ABSA Bank with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Standard Bank.
Diversification Opportunities for ABSA Bank and Standard Bank
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ABSA and Standard is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited 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 ABSA 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 ABSA Bank Limited 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 ABSA Bank i.e., ABSA Bank and Standard Bank go up and down completely randomly.
Pair Corralation between ABSA Bank and Standard Bank
Assuming the 90 days trading horizon ABSA Bank Limited is expected to generate 0.64 times more return on investment than Standard Bank. However, ABSA Bank Limited is 1.57 times less risky than Standard Bank. It trades about 0.32 of its potential returns per unit of risk. Standard Bank Group is currently generating about -0.3 per unit of risk. If you would invest 8,440,100 in ABSA Bank Limited on September 4, 2024 and sell it today you would earn a total of 339,600 from holding ABSA Bank Limited or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABSA Bank Limited vs. Standard Bank Group
Performance |
| Timeline |
| ABSA Bank Limited |
| Standard Bank Group |
ABSA Bank and Standard Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA Bank and Standard Bank
The main advantage of trading using opposite ABSA Bank and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank 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.| ABSA Bank vs. CA Sales Holdings | ABSA Bank vs. Astoria Investments | ABSA Bank vs. Blue Label Telecoms | ABSA Bank vs. Frontier Transport Holdings |
| Standard Bank vs. AfroCentric Investment Corp | Standard Bank vs. Allied Electronics | Standard Bank vs. Frontier Transport Holdings | Standard Bank vs. HomeChoice Investments |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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