Correlation Between Standard Bank and FNB
Can any of the company-specific risk be diversified away by investing in both Standard Bank and FNB 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 FNB 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 FNB Inc, you can compare the effects of market volatilities on Standard Bank and FNB 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 FNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and FNB.
Diversification Opportunities for Standard Bank and FNB
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Standard and FNB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and FNB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Inc 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 FNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Inc has no effect on the direction of Standard Bank i.e., Standard Bank and FNB go up and down completely randomly.
Pair Corralation between Standard Bank and FNB
Assuming the 90 days horizon Standard Bank is expected to generate 1.38 times less return on investment than FNB. But when comparing it to its historical volatility, Standard Bank Group is 2.64 times less risky than FNB. It trades about 0.05 of its potential returns per unit of risk. FNB Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,500 in FNB Inc on August 29, 2024 and sell it today you would earn a total of 0.00 from holding FNB Inc or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 66.73% |
| Values | Daily Returns |
Standard Bank Group vs. FNB Inc
Performance |
| Timeline |
| Standard Bank Group |
| FNB Inc |
Standard Bank and FNB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and FNB
The main advantage of trading using opposite Standard Bank and FNB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, FNB 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 FNB will offset losses from the drop in FNB's long position.| Standard Bank vs. Bank Central Asia | Standard Bank vs. Nedbank Group | Standard Bank vs. Kasikornbank Public Co | Standard Bank vs. KBC Groep NV |
| FNB vs. Century Financial Corp | FNB vs. Apollo Bancorp | FNB vs. Commercial National Financial | FNB vs. Eastern Michigan Financial |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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