Over the long term (3 and 4 quarters), the correlation between JSE:SBK and JSE:ABG is high, with readings of 0.92 and 0.93 respectively. Over the short term (21 trading days or 1 month's worth of trading), the correction has developed a discrepancy, with the ratio dropping to 0.55 (JSE:ABG outperforming JSE:SBK by 7.94% over 1 month). On this basis, a market neutral/pairs trading opportunity emerged has where the relative ratio is expected to revert to the short term mean, either fully or in part.
Trading Levels:
Entry: 0.9239 Stop-loss: 0.9025 Target: 0.9700
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