Correlation Between Nedbank and Overseas Chinese
Can any of the company-specific risk be diversified away by investing in both Nedbank and Overseas Chinese 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 Nedbank and Overseas Chinese into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nedbank Group and Overseas Chinese Banking, you can compare the effects of market volatilities on Nedbank and Overseas Chinese 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 Nedbank with a short position of Overseas Chinese. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nedbank and Overseas Chinese.
Diversification Opportunities for Nedbank and Overseas Chinese
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nedbank and Overseas is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nedbank Group and Overseas Chinese Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overseas Chinese Banking and Nedbank 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 Nedbank Group are associated (or correlated) with Overseas Chinese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overseas Chinese Banking has no effect on the direction of Nedbank i.e., Nedbank and Overseas Chinese go up and down completely randomly.
Pair Corralation between Nedbank and Overseas Chinese
Assuming the 90 days horizon Nedbank Group is expected to generate 1.69 times more return on investment than Overseas Chinese. However, Nedbank is 1.69 times more volatile than Overseas Chinese Banking. It trades about 0.04 of its potential returns per unit of risk. Overseas Chinese Banking is currently generating about 0.07 per unit of risk. If you would invest 1,116 in Nedbank Group on October 21, 2024 and sell it today you would earn a total of 407.00 from holding Nedbank Group or generate 36.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nedbank Group vs. Overseas Chinese Banking
Performance |
| Timeline |
| Nedbank Group |
| Overseas Chinese Banking |
Nedbank and Overseas Chinese Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nedbank and Overseas Chinese
The main advantage of trading using opposite Nedbank and Overseas Chinese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nedbank position performs unexpectedly, Overseas Chinese 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 Overseas Chinese will offset losses from the drop in Overseas Chinese's long position.| Nedbank vs. Standard Bank Group | Nedbank vs. Sanlam Ltd PK | Nedbank vs. Absa Group Ltd | Nedbank vs. Bank Mandiri Persero |
| Overseas Chinese vs. Swedbank AB | Overseas Chinese vs. KBC Groep NV | Overseas Chinese vs. Nordea Bank Abp | Overseas Chinese vs. DBS Group Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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