Correlation Between Standard Bank and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Standard Bank and HomeChoice Investments 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 Standard Bank and HomeChoice Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Bank Group and HomeChoice Investments, you can compare the effects of market volatilities on Standard Bank and HomeChoice Investments 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 Standard Bank with a short position of HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and HomeChoice Investments.
Diversification Opportunities for Standard Bank and HomeChoice Investments
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Standard and HomeChoice is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments and Standard 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 Standard Bank Group are associated (or correlated) with HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Standard Bank i.e., Standard Bank and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Standard Bank and HomeChoice Investments
Assuming the 90 days trading horizon Standard Bank Group is expected to generate 0.36 times more return on investment than HomeChoice Investments. However, Standard Bank Group is 2.8 times less risky than HomeChoice Investments. It trades about 0.03 of its potential returns per unit of risk. HomeChoice Investments is currently generating about -0.22 per unit of risk. If you would invest 937,000 in Standard Bank Group on August 28, 2024 and sell it today you would earn a total of 8,000 from holding Standard Bank Group or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Bank Group vs. HomeChoice Investments
Performance |
| Timeline |
| Standard Bank Group |
| HomeChoice Investments |
Standard Bank and HomeChoice Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and HomeChoice Investments
The main advantage of trading using opposite Standard Bank and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, HomeChoice Investments 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 HomeChoice Investments will offset losses from the drop in HomeChoice Investments' long position.| Standard Bank vs. Reinet Investments SCA | Standard Bank vs. Lesaka Technologies | Standard Bank vs. British American Tobacco | Standard Bank vs. HomeChoice 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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