Correlation Between Standard Bank and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Standard Bank and SLM Corp 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 SLM Corp 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 Sanlam, you can compare the effects of market volatilities on Standard Bank and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and SLM Corp.
Diversification Opportunities for Standard Bank and SLM Corp
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Standard and SLM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Standard Bank i.e., Standard Bank and SLM Corp go up and down completely randomly.
Pair Corralation between Standard Bank and SLM Corp
Assuming the 90 days trading horizon Standard Bank is expected to generate 3.37 times less return on investment than SLM Corp. But when comparing it to its historical volatility, Standard Bank Group is 1.36 times less risky than SLM Corp. It trades about 0.04 of its potential returns per unit of risk. Sanlam is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 644,818 in Sanlam on September 4, 2024 and sell it today you would earn a total of 258,282 from holding Sanlam or generate 40.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Bank Group vs. Sanlam
Performance |
| Timeline |
| Standard Bank Group |
| SLM Corp |
Standard Bank and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and SLM Corp
The main advantage of trading using opposite Standard Bank and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.| Standard Bank vs. Investec Limited NON | Standard Bank vs. Sasol Ltd Bee | Standard Bank vs. Centaur Bci Balanced | Standard Bank vs. Sabvest Capital |
| SLM Corp vs. Harmony Gold Mining | SLM Corp vs. Kumba Iron Ore | SLM Corp vs. Frontier Transport Holdings | SLM Corp vs. Datatec |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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