Correlation Between ABSA Bank and Capitec Bank
Can any of the company-specific risk be diversified away by investing in both ABSA Bank and Capitec 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 ABSA Bank and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABSA Bank Limited and Capitec Bank Holdings, you can compare the effects of market volatilities on ABSA Bank and Capitec 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 ABSA Bank with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Capitec Bank.
Diversification Opportunities for ABSA Bank and Capitec Bank
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ABSA and Capitec is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Capitec Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitec Bank Holdings and ABSA 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 ABSA Bank Limited are associated (or correlated) with Capitec Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitec Bank Holdings has no effect on the direction of ABSA Bank i.e., ABSA Bank and Capitec Bank go up and down completely randomly.
Pair Corralation between ABSA Bank and Capitec Bank
Assuming the 90 days trading horizon ABSA Bank Limited is expected to generate 1.57 times more return on investment than Capitec Bank. However, ABSA Bank is 1.57 times more volatile than Capitec Bank Holdings. It trades about 0.08 of its potential returns per unit of risk. Capitec Bank Holdings is currently generating about -0.04 per unit of risk. If you would invest 8,260,100 in ABSA Bank Limited on September 26, 2024 and sell it today you would earn a total of 415,400 from holding ABSA Bank Limited or generate 5.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ABSA Bank Limited vs. Capitec Bank Holdings
Performance |
Timeline |
ABSA Bank Limited |
Capitec Bank Holdings |
ABSA Bank and Capitec Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ABSA Bank and Capitec Bank
The main advantage of trading using opposite ABSA Bank and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank position performs unexpectedly, Capitec 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 Capitec Bank will offset losses from the drop in Capitec Bank's long position.ABSA Bank vs. Capitec Bank Holdings | ABSA Bank vs. Standard Bank Group | ABSA Bank vs. Capitec Bank Holdings | ABSA Bank vs. Absa Group |
Capitec Bank vs. ABSA Bank Limited | Capitec Bank vs. Capitec Bank Holdings | Capitec Bank vs. Standard Bank Group | Capitec Bank vs. Absa Group |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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