Correlation Between Standard Bank and National Bank
Can any of the company-specific risk be diversified away by investing in both Standard Bank and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Standard Bank and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and National Bank.
Diversification Opportunities for Standard Bank and National Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Standard and National is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Standard Bank i.e., Standard Bank and National Bank go up and down completely randomly.
Pair Corralation between Standard Bank and National Bank
Assuming the 90 days horizon Standard Bank Group is expected to generate 0.71 times more return on investment than National Bank. However, Standard Bank Group is 1.41 times less risky than National Bank. It trades about 0.08 of its potential returns per unit of risk. National Bank of is currently generating about 0.04 per unit of risk. If you would invest 981.00 in Standard Bank Group on August 26, 2024 and sell it today you would earn a total of 390.00 from holding Standard Bank Group or generate 39.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Bank Group vs. National Bank of
Performance |
| Timeline |
| Standard Bank Group |
| National Bank |
Standard Bank and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and National Bank
The main advantage of trading using opposite Standard Bank and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| Standard Bank vs. PSB Holdings | Standard Bank vs. United Overseas Bank | Standard Bank vs. Turkiye Garanti Bankasi |
| National Bank vs. PSB Holdings | National Bank vs. United Overseas Bank | National Bank vs. Turkiye Garanti Bankasi |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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