Correlation Between Investec and Standard Bank
Can any of the company-specific risk be diversified away by investing in both Investec 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 Investec and Standard Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investec and Standard Bank Group, you can compare the effects of market volatilities on Investec 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 Investec with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec and Standard Bank.
Diversification Opportunities for Investec and Standard Bank
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Investec and Standard is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Investec 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 Investec 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 Investec 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 Investec i.e., Investec and Standard Bank go up and down completely randomly.
Pair Corralation between Investec and Standard Bank
Assuming the 90 days trading horizon Investec is expected to generate 4.45 times less return on investment than Standard Bank. But when comparing it to its historical volatility, Investec is 1.1 times less risky than Standard Bank. It trades about 0.04 of its potential returns per unit of risk. Standard Bank Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,799,931 in Standard Bank Group on September 1, 2024 and sell it today you would earn a total of 568,869 from holding Standard Bank Group or generate 31.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investec vs. Standard Bank Group
Performance |
| Timeline |
| Investec |
| Standard Bank Group |
Investec and Standard Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investec and Standard Bank
The main advantage of trading using opposite Investec and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec 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.| Investec vs. ABSA Bank Limited | Investec vs. Capitec Bank Holdings | Investec vs. Standard Bank Group | Investec vs. Absa Group |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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