Correlation Between Capitec Bank and BHP Group
Can any of the company-specific risk be diversified away by investing in both Capitec Bank and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on Capitec Bank and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and BHP Group.
Diversification Opportunities for Capitec Bank and BHP Group
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Capitec and BHP is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Capitec Bank i.e., Capitec Bank and BHP Group go up and down completely randomly.
Pair Corralation between Capitec Bank and BHP Group
Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 1.1 times more return on investment than BHP Group. However, Capitec Bank is 1.1 times more volatile than BHP Group Limited. It trades about 0.09 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.0 per unit of risk. If you would invest 15,093,200 in Capitec Bank Holdings on December 4, 2024 and sell it today you would earn a total of 15,390,100 from holding Capitec Bank Holdings or generate 101.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Capitec Bank Holdings vs. BHP Group Limited
Performance |
Timeline |
Capitec Bank Holdings |
BHP Group Limited |
Capitec Bank and BHP Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capitec Bank and BHP Group
The main advantage of trading using opposite Capitec Bank and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.Capitec Bank vs. HomeChoice Investments | Capitec Bank vs. Astral Foods | Capitec Bank vs. Copper 360 | Capitec Bank vs. Astoria Investments |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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