Correlation Between Capitec Bank and Afine Investments

Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Afine Investments 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 Capitec Bank and Afine Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capitec Bank Holdings and Afine Investments, you can compare the effects of market volatilities on Capitec Bank and Afine Investments 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 Capitec Bank with a short position of Afine Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Afine Investments.

Diversification Opportunities for Capitec Bank and Afine Investments

0.14

Correlation Coefficient

Capitec Bank  Afine Investments

Average diversification

The 3 months correlation between Capitec and Afine is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Afine Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afine Investments and Capitec 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 Capitec Bank Holdings are associated (or correlated) with Afine Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afine Investments has no effect on the direction of Capitec Bank i.e., Capitec Bank and Afine Investments go up and down completely randomly.

Pair Corralation between Capitec Bank and Afine Investments

Assuming the 90 days trading horizon Capitec Bank is expected to generate 200.21 times less return on investment than Afine Investments. But when comparing it to its historical volatility, Capitec Bank Holdings is 122.34 times less risky than Afine Investments. It trades about 0.07 of its potential returns per unit of risk. Afine Investments is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  42,995  in Afine Investments on September 24, 2024 and sell it today you would lose (2,895) from holding Afine Investments or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Capitec Bank Holdings  vs.  Afine Investments

Capitec Bank Holdings

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capitec Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Afine Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afine Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Afine Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capitec Bank and Afine Investments

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

The idea behind Capitec Bank Holdings and Afine Investments 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.