Correlation Between Standard Bank and Life Healthcare
Can any of the company-specific risk be diversified away by investing in both Standard Bank and Life Healthcare 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 Life Healthcare 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 Life Healthcare, you can compare the effects of market volatilities on Standard Bank and Life Healthcare 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 Life Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and Life Healthcare.
Diversification Opportunities for Standard Bank and Life Healthcare
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Standard and Life is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Life Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare 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 Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare has no effect on the direction of Standard Bank i.e., Standard Bank and Life Healthcare go up and down completely randomly.
Pair Corralation between Standard Bank and Life Healthcare
Assuming the 90 days trading horizon Standard Bank Group is expected to generate 0.57 times more return on investment than Life Healthcare. However, Standard Bank Group is 1.74 times less risky than Life Healthcare. It trades about -0.11 of its potential returns per unit of risk. Life Healthcare is currently generating about -0.18 per unit of risk. If you would invest 940,000 in Standard Bank Group on November 28, 2024 and sell it today you would lose (15,000) from holding Standard Bank Group or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Bank Group vs. Life Healthcare
Performance |
| Timeline |
| Standard Bank Group |
| Life Healthcare |
Standard Bank and Life Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and Life Healthcare
The main advantage of trading using opposite Standard Bank and Life Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, Life Healthcare 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 Life Healthcare will offset losses from the drop in Life Healthcare's long position.| Standard Bank vs. HomeChoice Investments | Standard Bank vs. Advtech | Standard Bank vs. British American Tobacco | Standard Bank vs. Safari Investments RSA |
| Life Healthcare vs. Capitec Bank Holdings | Life Healthcare vs. Brimstone Investment | Life Healthcare vs. Bytes Technology | Life Healthcare vs. ABSA Bank Limited |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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