Correlation Between Capitec Bank and CA Sales

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

Diversification Opportunities for Capitec Bank and CA Sales

0.42

Correlation Coefficient

Capitec Bank  CA Sales

Very weak diversification

The 3 months correlation between Capitec and CAA is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and CA Sales Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CA Sales Holdings 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 CA Sales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CA Sales Holdings has no effect on the direction of Capitec Bank i.e., Capitec Bank and CA Sales go up and down completely randomly.

Pair Corralation between Capitec Bank and CA Sales

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 0.58 times more return on investment than CA Sales. However, Capitec Bank Holdings is 1.73 times less risky than CA Sales. It trades about 0.15 of its potential returns per unit of risk. CA Sales Holdings is currently generating about 0.08 per unit of risk. If you would invest  22,415,300  in Capitec Bank Holdings on October 9, 2024 and sell it today you would earn a total of  9,054,700  from holding Capitec Bank Holdings or generate 40.4% return on investment over 90 days.

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

Capitec Bank Holdings  vs.  CA Sales Holdings

Capitec Bank Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 3 (%) 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.

CA Sales Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capitec Bank and CA Sales

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

The idea behind Capitec Bank Holdings and CA Sales Holdings 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.