Correlation Between RMB Holdings and Nedbank
Can any of the company-specific risk be diversified away by investing in both RMB Holdings and Nedbank 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 RMB Holdings and Nedbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RMB Holdings and Nedbank Group, you can compare the effects of market volatilities on RMB Holdings and Nedbank 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 RMB Holdings with a short position of Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of RMB Holdings and Nedbank.
Diversification Opportunities for RMB Holdings and Nedbank
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between RMB and Nedbank is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding RMB Holdings and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group and RMB Holdings 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 RMB Holdings are associated (or correlated) with Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of RMB Holdings i.e., RMB Holdings and Nedbank go up and down completely randomly.
Pair Corralation between RMB Holdings and Nedbank
Assuming the 90 days trading horizon RMB Holdings is expected to generate 2.58 times less return on investment than Nedbank. In addition to that, RMB Holdings is 1.23 times more volatile than Nedbank Group. It trades about 0.04 of its total potential returns per unit of risk. Nedbank Group is currently generating about 0.13 per unit of volatility. If you would invest 2,281,856 in Nedbank Group on September 1, 2024 and sell it today you would earn a total of 605,944 from holding Nedbank Group or generate 26.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RMB Holdings vs. Nedbank Group
Performance |
| Timeline |
| RMB Holdings |
| Nedbank Group |
RMB Holdings and Nedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RMB Holdings and Nedbank
The main advantage of trading using opposite RMB Holdings and Nedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMB Holdings position performs unexpectedly, Nedbank 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 Nedbank will offset losses from the drop in Nedbank's long position.| RMB Holdings vs. ABSA Bank Limited | RMB Holdings vs. Capitec Bank Holdings | RMB Holdings vs. Standard Bank Group | RMB Holdings vs. Absa Group |
| Nedbank vs. Zeder Investments | Nedbank vs. Deneb Investments | Nedbank vs. Hosken Consolidated Investments | Nedbank vs. Copper 360 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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