Correlation Between Standard Bank and Sanlam

Can any of the company-specific risk be diversified away by investing in both Standard Bank and Sanlam 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 Sanlam 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 Ltd PK, you can compare the effects of market volatilities on Standard Bank and Sanlam 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 Sanlam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and Sanlam.

Diversification Opportunities for Standard Bank and Sanlam

0.52

Correlation Coefficient

Standard Bank  Sanlam

Very weak diversification

The 3 months correlation between Standard and Sanlam is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of Standard Bank i.e., Standard Bank and Sanlam go up and down completely randomly.

Pair Corralation between Standard Bank and Sanlam

Assuming the 90 days horizon Standard Bank Group is expected to under-perform the Sanlam. In addition to that, Standard Bank is 1.08 times more volatile than Sanlam Ltd PK. It trades about -0.03 of its total potential returns per unit of risk. Sanlam Ltd PK is currently generating about 0.05 per unit of volatility. If you would invest  970.00  in Sanlam Ltd PK on September 14, 2024 and sell it today you would earn a total of  34.00  from holding Sanlam Ltd PK or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Standard Bank Group  vs.  Sanlam Ltd PK

Standard Bank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Bank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Standard Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sanlam Ltd PK

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sanlam Ltd PK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Sanlam is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Standard Bank and Sanlam

The main advantage of trading using opposite Standard Bank and Sanlam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, Sanlam 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 Sanlam will offset losses from the drop in Sanlam's long position.

The idea behind Standard Bank Group and Sanlam Ltd PK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.