Correlation Between Allied Electronics and Standard Bank
Can any of the company-specific risk be diversified away by investing in both Allied Electronics 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 Allied Electronics and Standard Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Electronics and Standard Bank Group, you can compare the effects of market volatilities on Allied Electronics 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 Allied Electronics with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and Standard Bank.
Diversification Opportunities for Allied Electronics and Standard Bank
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Allied and Standard is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics 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 Allied Electronics 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 Allied Electronics 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 Allied Electronics i.e., Allied Electronics and Standard Bank go up and down completely randomly.
Pair Corralation between Allied Electronics and Standard Bank
Assuming the 90 days trading horizon Allied Electronics is expected to generate 1.09 times more return on investment than Standard Bank. However, Allied Electronics is 1.09 times more volatile than Standard Bank Group. It trades about 0.05 of its potential returns per unit of risk. Standard Bank Group is currently generating about -0.19 per unit of risk. If you would invest 202,500 in Allied Electronics on September 12, 2024 and sell it today you would earn a total of 2,600 from holding Allied Electronics or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Electronics vs. Standard Bank Group
Performance |
| Timeline |
| Allied Electronics |
| Standard Bank Group |
Allied Electronics and Standard Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Electronics and Standard Bank
The main advantage of trading using opposite Allied Electronics and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Electronics 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.| Allied Electronics vs. Copper 360 | Allied Electronics vs. RCL Foods | Allied Electronics vs. Deneb Investments | Allied Electronics vs. Hosken Consolidated Investments |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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