Correlation Between Standard Bank and First Reliance
Can any of the company-specific risk be diversified away by investing in both Standard Bank and First Reliance 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 First Reliance 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 First Reliance Bancshares, you can compare the effects of market volatilities on Standard Bank and First Reliance 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 First Reliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and First Reliance.
Diversification Opportunities for Standard Bank and First Reliance
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Standard and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and First Reliance Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Reliance Bancshares 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 First Reliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Reliance Bancshares has no effect on the direction of Standard Bank i.e., Standard Bank and First Reliance go up and down completely randomly.
Pair Corralation between Standard Bank and First Reliance
Assuming the 90 days horizon Standard Bank Group is expected to under-perform the First Reliance. In addition to that, Standard Bank is 1.8 times more volatile than First Reliance Bancshares. It trades about -0.08 of its total potential returns per unit of risk. First Reliance Bancshares is currently generating about -0.1 per unit of volatility. If you would invest 999.00 in First Reliance Bancshares on August 29, 2024 and sell it today you would lose (19.00) from holding First Reliance Bancshares or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Bank Group vs. First Reliance Bancshares
Performance |
| Timeline |
| Standard Bank Group |
| First Reliance Bancshares |
Standard Bank and First Reliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and First Reliance
The main advantage of trading using opposite Standard Bank and First Reliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, First Reliance 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 First Reliance will offset losses from the drop in First Reliance'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 |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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